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, 2013
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
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Form 20-F [X]
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Form 40-F [ ]
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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.
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Yes [ ]
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No [X]
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If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g-32(b):82-_____________________
Strategy
is all about
choice
Novo Nordisk’s performance in 2012 is a result
of important decisions made in recent years
– but there is more to the story
Diabetes
– an emergency in slow motion
Sustainable
growth
– can it be done?
Insulin in
a tablet
– why is it so difficult?
 |
| 20 Diabetes – an emergency in slow motion |
 |
| 22 The protein powerhouse |
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| 28 Simple injections |
| Contents | |
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| Accomplishments | |
| and results 2012 | |
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| Our business | |
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| Governance, leadership and shares | |
| Shares and capital structure | |
| Corporate governance | |
| Remuneration | |
| Board of Directors | |
| Executive Management | |
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| Financial, social and environmental statements | |
| Consolidated financial, social and environmental statements | |
| Financial statements of the parent company | |
| Management’s statement and Auditor’s reports | |
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| Additional information | |
| More information | |
| Product overview | |
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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 language version. In the event of any discrepancies,
the Danish version shall prevail.
Chairman of the Board of Directors Sten Scheibye at the Annual General Meeting in March 2012.
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2012 was a very good year for Novo Nordisk. Both in terms of financial performance – with reported sales up by 18% and net profit growth of 25% – and progress in the company’s research and development pipeline, which promises well for the future. And as you will see from this Annual Report – in which we account for both financial, environmental and social performance – the company also did well in many other respects in 2012. The company’s Management and all its employees around the world can be proud of these results, which are exceptional in the pharmaceutical world these days when financial constraints and austerity measures are creating an increasingly difficult environment for research-based pharmaceutical companies. We are very aware that Novo Nordisk’s results are created against a sad background, namely the continuing rise in the number of people with diabetes around the world. And despite advances in healthcare over the years, only a small fraction of the people being treated today are well treated. As I said in last year’s report: There has never been more need for a company like Novo Nordisk; a company that has dedicated most of its resources, skills and innovation power to improving diabetes care. And at the same time is making very good use of the skills it has built within diabetes in developing its biopharmaceutical business, not the least within haemophilia. Every year, the Board of Directors reviews the company’s long-term strategy and outlook. As described in the article on p 15, the strategy is characterised by a strong focus on a few diseases, five core capabilities and a deeply rooted values-based management system. The Board remains confident that these strategic choices provide a solid basis for a continued positive development for Novo Nordisk in the coming years. We are also confident that with Lars Rebien Sørensen and his Executive Management team we have the leadership needed to execute the strategy and fulfil Novo Nordisk’s potential. Together with Lars and his team, in January 2013 we decided to expand
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Executive Management with two executives, promoted from senior vice president positions within the company. This lifts the direct responsibility for critical functions such as marketing, business development and IT into Executive Management, while also broadening the group of senior managers. In his letter on the following pages, Lars outlines some key events in 2013, and as you will see, it looks like yet another exciting year for Novo Nordisk. However, I must also remind you that for Novo Nordisk, as for any company of our size in the pharmaceutical industry, there is always the risk of something not going as we expected. In the article on p 41, you can read more about key risks of which you should be aware. At the Annual General Meeting on 20 March 2013, the Board of Directors will propose a 29% increase in dividend to 18 Danish kroner per share. The Board of Directors has furthermore decided to initiate a new share repurchase programme of up to 14 billion kroner. For me personally, 2012 was the last full year on the Board of Directors of which I have been a member since 2003 and had the privilege to chair since 2006. It has been an exciting journey, in the course of which Novo Nordisk has developed into a leading, global and highly respected company. Shareholder return has been high, and the company’s strategic foundation has been strengthened, making it well prepared to address the challenges ahead. On behalf of the Board of Directors, I would like to express my appreciation for the leadership shown by Lars and his Management team and the hard work and dedication of the entire Novo Nordisk organisation. Sten
Scheibye |
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resident and Chief Executive Officer Lars Rebien Sørensen at the European Diabetes Leadership Forum in April 2012.
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In 1923, the first patients were treated with insulin from the company that is now Novo Nordisk. Today, 90 years later, insulin is still our main product. I think it is worth mentioning for several reasons: it says something about how focused this company has been for many years – and still is. It also shows that insulin and other protein-based medicines – ‘protein therapeutics’ as they are also called – are fundamentally different from traditional chemical medicines in that our clever researchers can always find ways to make them even better. Finally, my brief history lesson is a reminder to all of us who work in the company today – many of whom are also shareholders in the company – that although we have good reason to be proud of what we have achieved with Novo Nordisk in recent years, we owe a lot to our predecessors, who laid the foundation for what we are doing today. Most annual reports these days talk about how the state of the global economy and the ensuing austerity measures put pressure on businesses. This report is no exception. We are often facing situations where governments are demanding price reductions that we consider unacceptable or implementing measures to limit new products’ access to the market. It puts us in a moral dilemma. On the one hand, we want to continue supplying our
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best products to customers around the world; on the other hand, we cannot sell our newest products at the old products’ prices. If we do that, we start to erode the whole innovation model that created the products in the first place. Then we deny all the 371 million people who have diabetes the possibility of future, better treatments and, ultimately, a cure for their disease. In such difficult times, it is crucial that we – industry, politicians and payers – rethink the approach to managing diabetes and other chronic diseases, ensuring more sustainable healthcare solutions. That is why we support initiatives such as the European Diabetes Leadership Forum, which gathered more than 700 participants in Copenhagen in April 2012 to discuss and agree on ambitions, priorities and actions for improving diabetes care in Europe and OECD countries. Despite the difficult economic climate, we were able to grow sales in 2012 by 12% measured in local currencies due to continued strong demand for some of our key products. As in 2011, the products behind most of this growth were our once-daily human GLP-1 analogue Victoza® (liraglutide) and two of our modern insulins, NovoRapid® (NovoLog® in the US) and Levemir®. |
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3
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From a regional perspective, North America was again the main contributor to our growth, followed by International Operations and Region China. As you will see from the article on p 32 about our different markets, it is 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 32% reported and 20% in local currencies While on the subject of profit, I am aware of the public debate on how much or how little large, international companies pay in corporate taxes. Therefore, it is important for me to assure you that Novo Nordisk does pay its fair share. In 2012, our tax expense amounted to 6,379 million kroner, corresponding to an effective tax rate of 22.9%. We pay taxes where profits are earned, according to international transfer pricing rules, and being a good corporate citizen everywhere we do business is a company objective. Several products in our development pipeline passed important milestones. However, almost all attention from investors and the media was on our new generation of insulins, Tresiba® (insulin degludec) and Ryzodeg® (a combination of insulin degludec and insulin aspart). Both products were approved in Japan in 2012 and in the EU in January 2013. In the US, Canada, Switzerland and other countries, the approval process is ongoing. Despite all eyes being on Tresiba® and Ryzodeg®, I would like to mention a few other encouraging developments. One is the completion of the phase 3a programme for IDegLira, a fixed-ratio combination of liraglutide and insulin degludec for the treatment of patients with type 2 diabetes. We are planning regulatory filing for IDegLira in the EU mid-2013 and in the US during 2013 pending marketing authorisation for Tresiba®. In December 2012, we selected for phase 3 development a new formulation of insulin aspart, called FIAsp, with a faster onset of appearance than NovoRapid® (NovoLog® in the US), which we hope will enable more flexible insulin administration in connection with meals, as well as improved blood sugar control after meals Within the area of haemophilia, we filed turoctocog alfa for approval in the EU, US and other markets. Turoctocog alfa is a recombinant factor VIII product for treatment of the most widespread form of haemophilia, haemophilia A. Furthermore, we launched NovoThirteen®, a recombinant factor XIII product for treatment of a rare bleeding disorder, in the EU and Canada (where it is marketed as Tretten®). On the negative side, we had to discontinue vactreptacog alfa, an analogue of recombinant factor VIIa, due to safety concerns. Another negative event, unrelated to our research and development pipeline, came in December, when we received a so-called Warning Letter from the US Food and Drug Administration (FDA), following an inspection of an aseptic filling facility in Bagsværd, Denmark, in March 2012. We immediately took action to address the concerns raised by the agency, learn from them, and prevent them from occurring again. We submitted our response to the Warning Letter on 28 December. At the time of writing this letter, we are still awaiting a response from the agency.
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In 2013, we will have special focus on: | ||||
| • |
the launch of Tresiba® in the EU, Japan (pending price negotiations) and other markets where it has been approved |
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• |
approval of Tresiba® and Ryzodeg® in the US and other countries, where the regulatory review process is ongoing | ||||
| • | regulatory
filing for IDegLira in the EU mid-2013 and in the US during 2013 pending
marketing authorisation of Tresiba® |
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| • | completion
of the phase 3 programme investigating the use of liraglutide for treatment
of people with obesity and co-morbidities |
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| • | initiation
of the phase 3 studies for semaglutide, a once-weekly GLP-1 analogue for
the treatment of type 2 diabetes; FIAsp; and liraglutide for type 1 diabetes
as adjunct to insulin. |
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| We
will invest in both current products and our new-generation insulins. We
will spend 14–15% of our sales on research and development of new,
innovative products, which will address unmet medical needs and help secure
Novo Nordisk’s long-term development. In 2013 alone, we expect that
more than 28,000 people will participate in Novo Nordisk-sponsored clinical
trials. And, we will continue investing in advocacy and activities in support
of people with diabetes and haemophilia.
All of these investments serve one purpose: To help patients live better lives. That is what drives us. We know there are millions of people with diabetes who could be living their lives in full if only they got the necessary medical treatment and care, and we are determined to contribute to closing that gap. We have set an ambition that by 2020 we will provide medical treatment to an estimated 40 million patients. Last but not least, we will continue investing in the development of our people, with a strong focus on doing business the Novo Nordisk Way – never compromising on quality and business ethics. Personally, I look forward to having two new members joining my Executive Management team: Lars Fruergaard Jørgensen, responsible for IT, Quality & Corporate Development, and Jakob Riis, head of Marketing & Medical Affairs. We have also promoted four corporate vice presidents in our US affiliate to senior vice presidents and members of the company’s global Senior Management Board. The promotions reflect the increasing size, complexity and strategic importance of our business and development pipeline in the US. I look forward to working with the new senior vice presidents and to the increased diversity and stronger US representation they bring to our Senior Management Board. I would like to thank everyone in the Novo Nordisk organisation for their contributions to our results in 2012, 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
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 a few questions at novonordisk.com/annualreport/feedback. |
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| 4 | ACCOMPLISHMENTS AND RESULTS 2012 |
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DKK
million
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2008
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2009
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2010
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2011
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2012
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2011–2012
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| Financial performance | Change | |||||||||||
| Sales | ||||||||||||
| Modern insulins (insulin analogues) | 17,317 | 21,471 | 26,601 | 28,765 | 34,821 | 21% | ||||||
| Human insulins | 11,804 | 11,315 | 11,827 | 10,785 | 11,302 | 5% | ||||||
| Victoza® | – | 87 | 2,317 | 5,991 | 9,495 | 58% | ||||||
| Protein-related products | 1,844 | 1,977 | 2,214 | 2,309 | 2,511 | 9% | ||||||
| Oral antidiabetic products (OAD) | 2,391 | 2,652 | 2,751 | 2,575 | 2,758 | 7% | ||||||
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| Diabetes care total | 33,356 | 37,502 | 45,710 | 50,425 | 60,887 | 21% | ||||||
| NovoSeven® | 6,396 | 7,072 | 8,030 | 8,347 | 8,933 | 7% | ||||||
| Norditropin® | 3,865 | 4,401 | 4,803 | 5,047 | 5,698 | 13% | ||||||
| Hormone replacement therapy | 1,612 | 1,744 | 1,892 | 2,054 | 2,163 | 5% | ||||||
| Other products | 324 | 359 | 341 | 473 | 345 | (27% | ) | |||||
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| Biopharmaceuticals total | 12,197 | 13,576 | 15,066 | 15,921 | 17,139 | 8% | ||||||
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| Total sales by business segment | 45,553 | 51,078 | 60,776 | 66,346 | 78,026 | 18% | ||||||
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| North America | 15,154 | 18,279 | 23,609 | 26,586 | 34,220 | 29% | ||||||
| Europe | 17,219 | 17,540 | 18,664 | 19,168 | 19,707 | 3% | ||||||
| International Operations | 6,353 | 6,835 | 8,335 | 9,367 | 11,080 | 18% | ||||||
| Japan & Korea | 4,196 | 4,888 | 5,660 | 6,223 | 6,617 | 6% | ||||||
| Region China | 2,631 | 3,536 | 4,508 | 5,002 | 6,402 | 28% | ||||||
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| Total sales by geographical segment | 45,553 | 51,078 | 60,776 | 66,346 | 78,026 | 18% | ||||||
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| Underlying sales growth in local currencies | 12% | 11% | 13% | 11% | 12% | |||||||
| Currency effect (local currency impact) | (3% | ) | 1% | 6% | (2% | ) | 6% | |||||
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| Total sales growth as reported | 9% | 12% | 19% | 9% | 18% | |||||||
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| Depreciation, amortisation and impairment losses | 2,442 | 2,551 | 2,467 | 2,737 | 2,693 | (2% | ) | |||||
| Operating profit | 12,373 | 14,933 | 18,891 | 22,374 | 29,474 | 32% | ||||||
| Net financials | 322 | (945 | ) | (605 | ) | (449 | ) | (1,663 | ) | 270% | ||
| Profit before income taxes | 12,695 | 13,988 | 18,286 | 21,925 | 27,811 | 27% | ||||||
| Net profit for the year | 9,645 | 10,768 | 14,403 | 17,097 | 21,432 | 25% | ||||||
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| Total assets | 50,603 | 54,742 | 61,402 | 64,698 | 65,669 | 2% | ||||||
| Equity | 32,979 | 35,734 | 36,965 | 37,448 | 40,632 | 9% | ||||||
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| Capital expenditure, net | 1,754 | 2,631 | 3,308 | 3,003 | 3,319 | 11% | ||||||
| Free cash flow1 | 11,015 | 12,332 | 17,013 | 18,112 | 18,645 | 3% | ||||||
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| Financial ratios | ||||||||||||
| Percentage of sales | ||||||||||||
| Sales outside Denmark | 99.2% | 99.2% | 99.4% | 99.3% | 99.4% | |||||||
| Sales and distribution costs | 28.2% | 30.2% | 29.9% | 28.6% | 27.6% | |||||||
| Research and development costs | 17.2% | 15.4% | 15.8% | 14.5% | 14.0% | |||||||
| Administrative costs | 5.8% | 5.4% | 5.0% | 4.9% | 4.2% | |||||||
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| Gross margin1 | 77.8 | % | 79.6% | 80.8% | 81.0% | 82.7% | ||||||
| Net profit margin1 | 21.2 | % | 21.1% | 23.7% | 25.8% | 27.5% | ||||||
| Effective tax rate1 | 24.0 | % | 23.0% | 21.2% | 22.0% | 22.9% | ||||||
| Equity ratio1 | 65.2 | % | 65.3% | 60.2% | 57.9% | 61.9% | ||||||
| Return on equity (ROE)1 | 29.6 | % | 31.3% | 39.6% | 46.0% | 54.9% | ||||||
| Cash to earnings1 | 114.2 | % | 114.5% | 118.1% | 105.9% | 87.0% | ||||||
| Payout ratio1 | 37.8 | % | 40.9% | 39.6% | 45.3% | 45.3% | ||||||
| Payout ratio excl non-recurring events2 | 36.6 | % | 40.9% | 42.8% | 45.3% | 45.3% | ||||||
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| Long-term financial targets | Targets3 | |||||||||||
| Operating profit margin1 | 27.2% | 29.2% | 31.1% | 33.7% | 37.8% | 40% | ||||||
| Operating profit growth | 38.4% | 20.7% | 26.5% | 18.4% | 31.7% | 15% | ||||||
| Operating profit after tax to net operating assets1 | 37.4% | 47.3% | 63.6% | 77.9% | 99.0% | 125% | ||||||
| Cash to earnings, (three-year average) | 97.6% | 111.5% | 115.6% | 112.8% | 103.7% | 90% | ||||||
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NOVO NORDISK ANNUAL REPORT 2012
|
ACCOMPLISHMENTS
AND RESULTS 2012
|
5
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2008
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2009
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2010
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2011
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2012
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2011–2012
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| Social performance | Change | |||||||||||
| Patients: | ||||||||||||
| Least developed countries where Novo Nordisk sells | ||||||||||||
| insulin according to the differential pricing policy |
32
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36 | 33 | 36 | 35 | (3% | ) | |||||
| Healthcare professionals trained or educated | ||||||||||||
| in diabetes (1,000) |
N/A
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425 | 373 | 835 | 1,274 | 53% | ||||||
| People with diabetes trained (1,000) |
N/A
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416 | 494 | 626 | 836 | 34% | ||||||
| Donations (DKK million) |
78
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83 | 84 | 81 | 84 | 4% | ||||||
| New patent families (first filings) |
71
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55 | 62 | 80 | 65 | (19% | ) | |||||
| Employees: | ||||||||||||
| Employees (total) |
27,068
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29,329 | 30,483 | 32,632 | 34,731 | 6% | ||||||
| Employees (average FTEs) |
26,069
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27,985 | 29,423 | 31,499 | 33,061 | 5% | ||||||
| Employee turnover |
12.1%
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8.3% | 9.1% | 9.8% | 9.1% | |||||||
| Assurance: | ||||||||||||
| Relevant employees trained in business ethics |
N/A
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N/A
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98% | % | 99% | 99% | ||||||
| Business ethics assurance activities |
25
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30
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35 | 46 | 48 | 4% | ||||||
| Fulfilment of action points from facilitations | ||||||||||||
| of the Novo Nordisk Way |
92%
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93%
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93% | 93% | 94% | |||||||
| Product recalls |
2
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2
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5 | 5 | 6 | 20% | ||||||
| Warning Letters and re-inspections |
0
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0
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0 | 0 | 1 | – | ||||||
| Company reputation with external | ||||||||||||
| key stakeholders (scale 1–7) |
N/A
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N/A
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N/A
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5.6 | 5.7 | 2% | ||||||
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| Long-term social targets | Targets | |||||||||||
| Patients reached with diabetes care | ||||||||||||
| products (million) (estimate)4 |
N/A
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N/A
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N/A
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21 | 23 | 40 million by 2020 | ||||||
| Working the Novo Nordisk Way | ||||||||||||
| (employee assessment) (scale 1– 5) |
N/A
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N/A
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N/A
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4.3 | 4.3 | 4.0 | ||||||
| Diverse senior management teams5 |
43%
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50%
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54% | 62% | 66% | 100% by 2014 | ||||||
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| Environmental performance | Change | |||||||||||
| Resources: | ||||||||||||
| Energy consumption (1,000 GJ) |
2,533
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2,246
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2,234 | 2,187 | 2,433 | 11% | ||||||
| Water consumption (1,000 m3) |
2,684
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2,149
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2,047 | 2,136 | 2,475 | 16% | ||||||
| Emissions and waste: | ||||||||||||
| CO2 emissions from energy consumption (1,000 tons) |
217
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166
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95 | 94 | 122 | 30% | ||||||
| Wastewater (1,000 m3) |
2,542
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2,062
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1,935 | 2,036 | 2,272 | 12% | ||||||
| Waste (tons) |
24,314
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26,362
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25,627 | 41,376 | 82,802 | 100% | ||||||
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| Long-term environmental targets | Targets | |||||||||||
| Energy consumption | ||||||||||||
| (change compared with prior year) | (9% | ) | (11% | ) | (1% | ) | (2% | ) | 11% | 3% annual growth | 6 | |
| Water consumption | ||||||||||||
| (change compared with prior year) | (17% | ) | (20% | ) | (5% | ) | 4% | 16% | 5% annual growth | 6 | ||
| CO2 emissions from energy consumption | 10% reduction | |||||||||||
| (change compared with 2004)7 | (1% | ) | (24% | ) | (56% | ) | (57% | ) | (44% | by 2014 | ||
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| Share performance | Change | |||||||||||
| Basic earnings per share/ADR in DKK1 | 15.66 | 17.97 | 24.81 | 30.24 | 39.09 | 29% | ||||||
| Diluted earnings per share/ADR in DKK1 | 15.54 | 17.82 | 24.60 | 29.99 | 38.85 | 30% | ||||||
| Dividend per share in DKK | 6.00 | 7.50 | 10.00 | 14.00 | 18.00 | 29% | ||||||
| Total dividend (DKK million) | 3,650 | 4,400 | 5,700 | 7,742 | 9,715 | 8 | 25% | |||||
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| 1. | For definitions, please refer to p 93. |
| 2. | Impact of Zymogenetics, Inc. share divestment, discontinuation of all pulmonary diabetes projects and impact of DAKO A/S share divestment. |
| 3. | The long-term financial targets were updated in February 2013. Please refer to p 10. |
| 4. | The accounting policy has been updated in line with WHO definition, and historical data have been restated accordingly. Please refer to p 97. |
| 5. | 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 is not achievable. |
| 6. | For target definition, please refer to p 14. |
| 7. | The accounting policy has been updated and historical data have been restated accordingly. The target remains unchanged. Please refer to p 102. |
| 8. | Proposed dividend for the year (not yet declared). |
NOVO NORDISK ANNUAL REPORT 2012
| 6 | ACCOMPLISHMENTS AND RESULTS 2012 |
|
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2012 performance and 2013 outlook
2012 was a positive year for Novo Nordisk with strong sales growth, robust performance against long-term financial and social targets and significant progress in the clinical development pipeline.
|
Financial performance The results for the year are higher than expected in the outlook in the Annual Report 2011 and in line with the latest guidance provided in connection with the quarterly announcement in October 2012.1 Sales development
In the following sections, unless otherwise noted, market data is based on moving |
annual total (MAT) from November 2012 and November 2011 provided by the independent data provider IMS Health. Diabetes
care sales development Modern
insulins, human insulins and protein-related products Sales of modern insulins increased by 21% in Danish kroner to DKK 34,821 million and by 15% in local currencies. North America accounted for more than half of the growth, followed by International Operations and Region China. Sales of modern insulins now |
constitute more than 75% of Novo Nordisk’s sales of insulin. North
America Europe International
Operations |
||
| 1. | Please refer to the company announcement dated 31 January 2013 for explanation of results compared to latest expectations. |
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NOVO NORDISK ANNUAL REPORT 2012
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ACCOMPLISHMENTS
AND RESULTS 2012
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7
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Operations increased by 19% in Danish kroner and by 16% in local currencies. The growth is driven by all three modern insulins and a solid contribution from human insulins. Currently, 58% of Novo Nordisk’s insulin volume in the major private markets is used in devices. Japan & Korea
Region China
Victoza®
(GLP-1 therapy for type 2 diabetes) |
North
America
Sales of Victoza® in North America increased by 60% in Danish kroner and by 48% measured in local currencies. This reflects a continued expansion of the GLP-1 class, which represents 7.3% of the total US diabetes care market in value compared with 5.8% in 2011. Despite the launch of a competitive product, Victoza® continues to drive the US GLP-1 market expansion and is the GLP-1 market leader with a 62% value market share. Europe
International
Operations Japan
& Korea |
Region China
NovoNorm®/Prandin®/PrandiMet®
(oral antidiabetic products) Biopharmaceuticals
sales development NovoSeven® CONTINUED ► |
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NOVO NORDISK ANNUAL REPORT 2012
| 8 | ACCOMPLISHMENTS AND RESULTS 2012 |
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|
Norditropin®
Other
products Development
in costs and operating profit Total non-production-related costs increased by 12% to DKK 35,753 million and by 8% in local currencies. Sales and distribution costs increased by 13% to DKK 21,544 million and by 8% in local currencies. The cost increase is driven by the expansion of the US sales force and other costs to prepare for the global launch of Tresiba® (insulin degludec). |
Furthermore, costs increased due to sales and marketing investments in selected countries in International Operations as well as the Chinese sales force expansion in mid-2011. Growth in sales and distribution costs is being partly offset by a reversal of provisions for legal disputes that have been resolved during 2012. Research and development costs increased by 13% to DKK 10,897 million and by 11% in local currencies. The cost increase is primarily driven by development costs related to the ongoing phase 3 trials for liraglutide in obesity and the phase 3a trials for IDegLira, a fixed-ratio combination of insulin degludec and liraglutide. Within biopharmaceuticals, costs are primarily related to the portfolio of development projects within haemophilia and the phase 2 trial for anti-IL-20, a recombinant human monoclonal antibody, in rheumatoid arthritis. Administration costs increased by 2% to DKK 3,312 million and stayed flat in local currencies. The unchanged costs in local currencies reflect items of a non-recurring nature in 2011 and 2012, and an underlying increase of approximately 4%, primarily to support the expansion of the international sales organisation. Licence fees and other operating income amounted to DKK 666 million compared with DKK 494 million in 2011. This development reflects a higher level of recurring royalty income. Operating profit in 2012 increased by 32% to DKK 29,474 million. In local currencies, the growth was 20%. Net
financials and tax In line with Novo Nordisk’s treasury policy, the most significant foreign exchange risks for the Group have |
been hedged primarily through forward currency contracts. Reflecting the portfolio of foreign currency exchange hedging contracts, the foreign exchange result for 2012 was an expense of DKK 1,529 million compared with an expense of DKK 322 million in 2011. This development reflects losses on foreign exchange hedging, involving especially the US dollar due to its appreciation versus the Danish krone compared with the prevailing exchange rate level in 2011. The effective tax rate for 2012 was 22.9%, amounting to DKK 6,379 million. Danish income tax amounted to DKK 3,527 million, and accounted for an estimated 11% of total Danish corporate tax contributions. Capital
expenditure and free cash flow Free cash flow for 2012 was DKK 18.6 billion compared with DKK 18.1 billion in 2011. The limited increase compared with 2011 reflects non-recurring tax payments in 2012 related to income tax disputes from prior years. Equity
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NOVO NORDISK ANNUAL REPORT 2012
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AND RESULTS 2012
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9
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Outlook 2013
The current expectations for 2013 are summarised in the table below:
|
|
|
| Expectations
are as reported, if not otherwise stated |
Expectations
31 January 2013 |
|
|
|
| Sales growth | |
| • in local currencies |
8–11%
|
| • as reported | Around 4.5 percentage points lower |
| Operating profit growth | |
| • in local currencies | Around 10% |
| • as reported | Around 7 percentage points lower |
| Net financials | Income of around DKK 1,400 million |
| Effective tax rate | Around 23% |
| Capital expenditure | Around DKK 3.5 billion |
| Depreciation, amortisation and impairment losses |
Around
DKK 3.0 billion
|
| Free cash flow | Around DKK 22 billion |
|
|
|
Novo Nordisk expects sales growth in 2013 of 8–11% measured in local currencies. This reflects expectations for continued robust penetration for the portfolio of modern insulins, a continued steady Victoza® performance and a positive sales contribution from Tresiba®, primarily in the US, the EU and Japan. These sales drivers are partly expected to be countered by an impact from the challenging pricing environments in major markets, generic competition to oral antidiabetic products, intensifying competition within diabetes care as well as biopharmaceuticals and 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 4.5 percentage points lower than growth measured in local currencies.
For 2013, operating profit growth is expected to be around 10% measured in local currencies. This reflects significant costs related to the expected global launch of Tresiba®, the expanded US sales force, as well as sales and marketing investments in China and in a selected number of countries in International Operations. Given the current level of exchange rates versus the Danish krone, the reported operating profit growth is now expected to be around 7 percentage points lower than growth measured in local currencies.
For 2013, Novo Nordisk expects a net financial income of around DKK 1,400 million. The current expectation primarily reflects gains associated with currency hedging contracts following the depreciation of the US dollar and the Japanese yen versus the
Danish krone compared with the average prevailing exchange rates in 2012. The expectations for gains related to currency hedging contracts are more than offset by the expected significant negative net impact on reported operating profit from the depreciation of invoicing currencies versus the Danish krone, primarily reflecting depreciation of non-hedged emerging market currencies.
The effective tax rate for 2013 is expected to be around 23%.
Capital expenditure is expected to be around DKK 3.5 billion in 2013, primarily related to investments in filling capacity and prefilled device production facilities, and new office buildings in Denmark. Depreciation, amortisation and impairment losses are expected to be around DKK 3.0 billion. Free cash flow is expected to be around DKK 22 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 2013, and that currency exchange rates, especially for 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 975 million | 12 |
| JPY | DKK 200 million | 13 |
| CNY | DKK 110 million1 | 12 |
| GBP | DKK 85 million | 12 |
| CAD | DKK 55 million | 8 |
|
|
|
|
1. USD used as proxy when hedging Novo Nordisk’s CNY currency exposure.
The financial impact from foreign exchange hedging is included in ‘Net financials’.
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NOVO NORDISK ANNUAL REPORT 2012
| 10 | ACCOMPLISHMENTS AND RESULTS 2012 |
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| Long-term financial targets | ||||||||||
| 2012 performance against 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 were subsequently revised and updated on several occasions. Novo Nordisk has now reached the performance level stipulated in the four long-term financial targets. The target levels have consequently been reviewed and two targets have been updated. | The targets have been revised 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 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 update The target level for operating profit growth remains at 15% on average. The target still allows for deviations in individual years if necessitated by business opportunities, market conditions or exchange rate movements. The target level for operating margin is increased from 35% to 40%. This is expected to be enabled by continued robust sales growth coupled with gross margin expansion from both product mix and pricing, as well as further productivity improvements in the manufacturing areas. For non-production-related activities, the operating margin expansion is expected to be supported by a modest development in administrative costs and scale advantages within sales and marketing, whereas continued investment is envisioned for research and development activities, which are expected to grow in line with sales. The target level for operating profit after tax to net operating assets is increased from 90% to 125%. The raised target reflects the expectation of a continued robust operating profit growth combined with a stable effective tax rate and relatively limited increase in net operating assets. The target level for the cash-to-earnings ratio is maintained at 90%, as expected continued growth in International Operations and Region China will gradually impact working capital requirements. As previously, this target will be pursued looking at the average over a three-year period. |
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 |
 |
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|
Result
|
Previous
|
Updated
|
||||||||
| Long-term financial target update |
2012
|
target
|
target
|
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|
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| Operating profit growth |
32%
|
15%
|
15%
|
|||||||
| Operating margin |
38%
|
35%
|
40%
|
|||||||
| Operating profit after tax to net operating assets |
99%
|
90%
|
125%
|
|||||||
| Cash to earnings |
87%
|
|||||||||
| Cash to earnings (three-year average) |
104%
|
90%
|
90%
|
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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 2013, 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 ‘2012 performance and 2013 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, government-mandated 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 the ‘Risk overview’ on p 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.
NOVO NORDISK ANNUAL REPORT 2012
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ACCOMPLISHMENTS
AND RESULTS 2012
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11
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Research
and
development progress
|
Diabetes care |
with
IDegLira, a fixed-ratio combination of Tresiba®
and Victoza®, for
treatment of patients with type 2 diabetes. The completed phase 3 clinical
trial programme, DUAL™,
reconfirmed the competitive profiles of each of the components and documented
that patients can benefit from the advantages of both compounds when combined
into one product. Novo Nordisk is planning regulatory filing for IDegLira
in the EU mid-2013 and in the US during 2013 pending marketing authorisation
of Tresiba®. Haemophilia |
discontinue the phase 3 development of vatreptacog alfa, a fast-acting recombinant factor VIIa analogue for haemophilia patients with inhibitors, due to an unfavourable benefit–risk profile. Finally, the phase 1 investigation of mAb2021 for all three haemophilia segments continued. Inflammation Clinical
trials |
NOVO NORDISK ANNUAL REPORT 2012
| 12 | ACCOMPLISHMENTS AND RESULTS 2012 |
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Social Access
to care 1. Includes headquarter functions and Research and Development in Denmark. |
Capacity-building Pricing Animal
testing |
11%, due to higher activity within early-stage discovery and development. This is partly countered by the elimination of the use of live animals for biological production control. The company works to continuously reduce, refine and replace the use of animals for testing. Working the Novo
Nordisk Way Diversity Health
and safety Business
ethics |
|
ACCOMPLISHMENTS
AND RESULTS 2012
|
13
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values-based
management system and policies for specific areas such as business ethics.
Adherence to the company’s global standards for ethical behaviour
must be observed and monitored. |
substantiated cases, none of which had any material impact for Novo Nordisk. Values Supplier
audits |
Nordisk’s global quality organisation, found no critical non-conformities. Quality |
|
Long-term social targets 2012 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 patients live better lives, working the | Novo Nordisk Way and nurturing a diverse working environment. In 2012 a new target was set to accelerate the reach to patients – from the 2011 baseline of 21 million to 40 million people by 2020. Performance against the target for working the Novo Nordisk Way was exceeded. Performance against the long-term target for diversity is on track. | |||||||
 |
 |
 |
||||||
| 1. New long-term target. Data not available prior to 2011. | ||||||||
| 2. All senior management teams must comply with the target to be diverse in terms of gender and nationality or explain why this is not achievable. | ||||||||
NOVO NORDISK ANNUAL REPORT 2012
| 14 | ACCOMPLISHMENTS AND RESULTS 2012 |
|
|
|
Environmental
performance
|
As production and sales continue to grow, it becomes increasingly challenging to meet the company’s long-term aspiration to keep minimising the total environmental impact. The environmental policy covers the entire value chain from molecule to patient. In addition to ensuring compliance and sound management practices in accordance with ISO 14001, efforts include process optimisations in production and innovation projects in partnership with suppliers, healthcare providers and local communities. Resources |
still rely on fossil fuels. Production increases at the Kalundborg site are therefore reflected as a negative trend in the total environmental performance, despite ongoing process optimisation, which has improved environmental impact. Around half of Novo Nordisk’s direct environmental footprint derives from the production site in Kalundborg. A partnership initiative to secure supplies of district heating and steam based on biological waste – modelled on the long-standing successful Symbiosis project – will, if successful, result in a reduced carbon footprint from consumption of district heating and steam. Emissions
and waste |
achieved
as a result of energy savings at all production sites and, in particular,
the conversion to renewable energy for electricity supplies in Denmark.
Initiatives to optimise resource utilisation, particularly in Kalundborg,
partly counter the increasing need arising from production growth. Options
for increasing the use of renewable energy in China, Denmark and the US
are being explored. |
|
Long-term environmental targets 2012 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 are ambitious and reflect the aspiration to produce more with less and continuously reduce impacts on the environment: to curb average | annual increases in energy to 3% and average annual increases in water consumption to 5%, and to achieve an absolute reduction in CO2 emissions of 10% by 2014, compared with the 2004 baseline. The CO2 emissions target is expected to be achieved. Performance against the targets for energy and water consumption is as projected. | |||||||
 |
 |
 |
||||||
| 1. From 2007 to 2011 the target was set as an accumulated reduction over four years from a 2007 baseline. | ||||||||
NOVO NORDISK ANNUAL REPORT 2012
Novo Nordisk is the world’s leading diabetes care company. While choices made in the past decade have played an important role in achieving this position, there is more to the story.
Today’s Novo Nordisk is the result of many decisions taken during more than 90 years The most important, without which there would be no company, was made in 1922. During a visit to the United States, August Krogh, a Danish Nobel laureate, and his wife, Marie, a medical doctor who had diabetes, learned about the discovery of insulin in Canada. Marie urged August to meet Professor Macleod in Toronto who led the team of researchers behind the discovery. After the meeting, August and Marie returned to Copenhagen bringing with them a permission and a desire to start insulin production in Scandinavia. In March 1923, the first patient was treated with insulin produced in Denmark.
This was the beginning of what is now Novo Nordisk. Since then, many other important decisions and choices have been made. The direction and strategy for the company’s further development are
laid out in a strategic framework, which forms the basis for the decisions and choices Management is making today. The framework forms a profile of Novo Nordisk with three distinct features:
First, Novo Nordisk has a sharp focus on a few diseases and conditions where it can make a significant difference. As a result, 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, the company has five distinctive core capabilities: | |
| • | Engineering, formulating, developing and delivering therapeutic proteins (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 |
Third, Novo Nordisk has a values-based management system formalised in the Novo Nordisk Way (see p 19). 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 23 million patients rely on for their daily medication, where more than 34,000 employees work, and in which more than 130,000 investors have bought shares.
CONTINUED ►
NOVO NORDISK ANNUAL REPORT 2012
| 16 | OUR BUSINESS |
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Responding to a challenging
business environment
In a world characterised
by slowing economic growth and austerity measures, the research-based pharmaceutical
companies’ business model is being challenged. Governments and private
payers are struggling to meet the demands of ageing populations and are reluctant
to pay a premium for new, innovative therapies. Furthermore, many companies
are seeing major products going off patent and are unable to bring out innovative
products that can make up for this lost revenue.
Pharmaceutical
companies have responded to these challenges in various ways. Research and
development budgets have been cut. Thousands of employees have been laid off.
Some companies 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.
Strategy
update
Novo Nordisk’s strategy
is updated and reviewed annually by the Board of Directors to ensure that
the company identifies and responds to new business challenges and opportunities
in a timely way. This is what led Novo Nordisk to direct its resources to
therapeutic proteins and five strategic focus areas. While other options for
broadening the company’s business and research focus are being considered
regularly as part of the annual strategy process, all indicators
show that the way in which Novo Nordisk can create most value for patients, shareholders and society at large is to remain focused on developing new, innovative therapeutic proteins within its current focus areas.
The five
strategic focus areas
Expand leadership in
diabetes care
In 2012, more than 371
million people worldwide were living with diabetes and it is predicted that
by 2030 more than 550 million people worldwide will have diabetes1
(all footnotes can be found on p 112). Read more about
the diabetes pandemic on pp 20–21.
The
global market for diabetes care products amounts to approximately DKK 228
billion, of which Novo Nordisk products account for about 26%. The market
has been growing by around 10% annually in recent years. Of this global market,
insulin accounts for 49%, oral diabetes products for 45% and GLP-1 products
for 6%.
Novo
Nordisk’s largest and fastest-growing business area is products for treating
diabetes, accounting for close to 80% of total sales. Within this area, the
company’s focus is on insulin and GLP-1. In both areas Novo Nordisk is
the global market leader by volume.
Novo
Nordisk is well positioned to address the unmet medical needs in diabetes:
| • | Around half of all insulin in the world comes from Novo Nordisk. |
| • | Novo Nordisk is the only company with a full portfolio of human insulins and modern insulins (also known as insulin analogues). |
| • | A new generation of insulins, Tresiba® (insulin degludec) and Ryzodeg® (insulin degludec/insulin aspart), is due to be launched in key markets in 2013. |
| • | Victoza® (liraglutide) has become the world's most prescribed GLP-1 product (Glucagon-Like Peptide 1) for treatment of adults with type 2 diabetes since its first launch in 2009. |
| • | Novo Nordisk makes the world's most widely used injection devices for insulin and GLP-1. |
| • | New promising treatments are under development, including a once-weekly GLP-1 analogue and a fixed-ratio combination of liraglutide and insulin degludec. |
| • | Finally, Novo Nordisk is involved in early-stage research with leading academic centres to find a cure for type 1 diabetes. |
| The insulin portfolio | |
| Novo Nordisk's modern insulin portfolio includes: | |
| • | NovoRapid® (NovoLog® in the US), the world's most widely used rapid-acting insulin for use at mealtimes. NovoRapid® is used by people with both type 1 and type 2 diabetes. |
| • | NovoMix® 70/50/30 (NovoLog® Mix 70/30 in the US) is a dual-release modern insulin that covers both mealtime and basal requirements. It can be used either to initiate or intensify insulin therapy and is primarily used by people with type 2 diabetes. |
NOVO NORDISK ANNUAL REPORT 2012
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BUSINESS
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17
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|
| • | Levemir® is a soluble, long-acting modern insulin for once-daily use for people with type 1 and 2 diabetes. Levemir® provides glucose control with a favourable weight profile. |
The primary goal of the company's research in diabetes is to discover new therapies that safely and effectively lower blood glucose while reducing the risk of low blood sugar (hypoglycaemia). Tresiba® and Ryzodeg® are the latest outcomes of this effort:
Tresiba®
is a once-daily basal insulin analogue with an ultra-long duration of action
and a flat and stable action profile which reduces the rate of low blood sugar
(hypoglycaemia). This also makes it possible to adjust insulin dosing time
when needed. Ryzodeg® is a soluble insulin combination of Tresiba®
and NovoRapid® (insulin aspart), providing both basal and mealtime glucose
control. Insulin aspart is marketed under the brand name NovoLog® in the
US. Read more about the challenges associated with insulin
treatment on pp 24-25.
Novo
Nordisk is also developing a faster-acting insulin to be taken at mealtimes,
FIAsp, a new formulation of insulin aspart. The phase 1 proof-of-concept trials
for a number of different formulations of insulin aspart have been completed
and Novo Nordisk expects to initiate the phase 3a programme, onset®, towards
the end of 2013.
In
addition to new and improved injectable insulins, Novo Nordisk is developing
formulations of insulin that can be taken orally as tablets. Encouraging progress
has been made in 2012, but many technological challenges remain. Read
more about the development of insulin in a tablet on pp 26-27.
GLP-1 (Glucagon-Like
Peptide 1) – a new class of diabetes treatments
With the launch of Victoza® in 2009, Novo Nordisk entered a new segment
of the diabetes care market: GLP-1 therapies. 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 major innovation in the treatment of type 2 diabetes because
it lowers glucose with a very low risk of triggering low blood sugar (hypoglycaemia).
Victoza®
is approved for adults with type 2 diabetes who are unable to achieve blood
glucose goals with lifestyle changes and metformin, the most widely used tablet
for type 2 diabetes). In less than two years Victoza® has become the leading
GLP-1 treatment globally and has steadily expanded the market for GLP-1 treatment.
The market is currently valued at approximately DKK 13.6 billion, of which
Victoza® accounts for approximately 68%. Available in more than 60 markets,
Victoza® is now used by approximately 700,000 people worldwide.
Furthermore,
a clinical pharmacology trial investigating the use of liraglutide as adjunct
therapy to insulin in people with type 1 diabetes, LATIN T1D (liraglutide
as adjunct therapy to insulin in people with type 1 diabetes) has been completed.
The phase 3 programme, ADJUNCT™ , which includes around 2,000 people
with type 1 diabetes, will be initiated in the second half of 2013.
Based
on the expertise Novo Nordisk has obtained through the development of Victoza®,
the company is now building a GLP-1 portfolio with the intention of providing
an even broader range of treatment options. Key projects include a once-weekly
GLP-1 analogue, semaglutide, which has been approved for phase 3, and IDegLira,
a fixed-ratio combination of liraglutide and insulin degludec, which offers
the benefits of both compounds.
Novo
Nordisk is also developing formulations of GLP-1 that can be taken as tablets.
Injection devices
Novo Nordisk offers the
world’s most widely used durable and disposable devices for insulin and
GLP-1: NovoPen®
4 and FlexPen®,
and has recently introduced its latest innovations NovoPen®
5 and FlexTouch® in
many markets. Read more about injection devices on p
28.
Establish 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 or obese. Of these, more than 200 million men and nearly
300 million women are clinically obese (ie BMI ≥ 30).2
Obesity is known to be a major risk factor in developing
serious diseases such as type 2 diabetes and cardiovascular disease.
Despite
the growing prevalence of severe and morbid obesity globally, there are currently
only a few medical treatment options, and reimbursement for these medications
is limited. The market is currently valued at DKK 1.7 billion.
Novo
Nordisk is investigating the use of once-daily liraglutide 3 mg as a new way
of treating high-risk obese patients, namely those with obesity-related medical
conditions such as prediabetes, sleep apnoea, high blood pressure and lipid.
Results of the phase 2 trials and the first of four phase 3 trials have been
reported. They suggest that liraglutide 3 mg may have a positive benefit–risk
profile.
Gaining
regulatory approval for antiobesity medications is a major challenge. However,
for the first time in more than a decade, the US Food and Drug Administration
has approved new obesity medications in 2012.
CONTINUED ►
NOVO NORDISK ANNUAL REPORT 2012
| 18 | OUR BUSINESS |
|
|
|
Pursue leadership
in haemophilia
Haemophilia is an inherited
or acquired bleeding disorder that prevents blood from clotting. An estimated
400,000 people worldwide are living with severe or moderate haemophilia. The
global haemophilia drug market is estimated at DKK 50 billion and has grown
by around 8% 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 & B market and achieve leadership by
developing improved treatment options for all patients. In October 2012, turoctocog
alfa – a recombinant factor VIII therapy – was filed for approval
in Europe and the US. Long-acting versions of recombinant factor VII and factor
IX are in phase 3 development. Read more about activities
within haemophilia on p 29.
Expand leadership
in growth disorders
Novo Nordisk has been active
in the treatment of growth hormone insufficiency for almost four decades. The
market for growth disorder treatments is estimated at DKK 18 billion and has
grown by close to 6% annually in recent years. Novo Nordisk is the leading human
growth hormone producer with a market share of 28% measured by value.
Novo
Nordisk’s strategy in growth hormone therapy is to expand leadership by
providing innovative and convenient products and devices. Norditropin®
is the only liquid, room temperature-stable growth hormone product available
in a prefilled pen device, the ergonomic Norditropin®
FlexPro® with an easy-touch
dosing mechanism.
Novo
Nordisk is also developing a long-acting growth hormone formulation, currently
in phase 1 trials.
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 chronic
disease management care to develop new treatments, particularly for patients
who are unresponsive to current treatments. While most projects are still at
an early stage of clinical development, three are 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. Around
6,000 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 of formulation
technology, protein engineering, expression and delivery, which makes it possible
for 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. Read more about capabilities in
research and development on pp 22–23.
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.
| 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. This 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 different 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 strategic plants in Denmark, France, the US, Brazil and China, which all have the approval and the ability to export to other markets. |
| • | In addition, Novo Nordisk has a number of smaller manufacturing plants which support local demand in selected countries. |
| • | All production facilities are operating under one global quality management system with centrally deployed standard operating procedures 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 generated during production processes.
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
within diabetes, which is being put to use in connection with the launches of
Tresiba® in 2013.
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 very early – as soon as there are signs of a market
developing – and to grow the organisation organically as the market develops.
This is a key reason behind Novo Nordisk’s success in emerging markets
such as China. Read more about Novo Nordisk’s markets
on pp 32–37.
The Triple Bottom Line business principle
Novo Nordisk’s sustainability strategy is based on the Triple Bottom Line business principle, which means the company sets goals, manages and accounts for
NOVO NORDISK ANNUAL REPORT 2012
performance on three dimensions:
financial, social and environmental. The aim is to ensure long-term profitability
by minimising any negative impacts from business activities and maximising the
positive footprint from its global operations: improved health, employment,
economic prosperity and social equity.
The
Triple Bottom Line model (see p 18) illustrates the three dimensions with patient
interests at the core, aiming to create long-term value by making balanced decisions.
Value is created in three ways. Firstly, it makes Novo Nordisk more adaptive
to changes in its business environment. This, in turn, helps protect the company’s
licence to operate and builds trust. Novo Nordisk proactively engages with stakeholders
to address emerging challenges in the business environment. One example is the
debate over access to health. Novo Nordisk has supported the advocacy for a
UN Resolution on Diabetes and is partnering with multiple stakeholders to bring
policies into action.
Secondly,
the Triple Bottom Line business principle strengthens competitiveness. The company
chose to invest in the conversion to renewable energy in Denmark in a strategic
partnership with its energy supplier. With this move, Novo Nordisk has managed
to continue to grow production and sales, and yet decrease carbon emissions
significantly. This is a good example of how sustainability-driven decisions
can drive operational excellence and reduce costs.
Finally,
the Triple Bottom Line business principle can be an engine for business development.
Through partnerships with stakeholders, Novo Nordisk can co-create innovative
solutions that lead to new opportunities to grow the business. One example is
a pilot project that makes human insulin available to low-income populations
in Kenya at prices they can afford and with effective distribution via local
communities.
Financially responsible:
profitable for the long term
Doing business in a profitable
and responsible way is the basis for delivering an attractive return on investment
for shareholders and making a contribution to society. Novo Nordisk uses four
financial targets to steer the business towards long-term profitable growth:
operating profit growth, operating profit margin, operating profit after tax
to net operating assets, and cash to earnings. These targets help Management
balance growth in the short term with investments in longer-term growth such
as research and development.
Socially responsible:
patients first
As a research-based healthcare
company, Novo Nordisk is focused on therapeutic innovations and improvements
to medical
treatment
for people with chronic diseases. Today, approximately 23 million people all
over the world benefit from the treatments Novo Nordisk offers. The company
also prioritises improving timely detection and prevention of diabetes and invests
in strengthening healthcare infrastructure, awareness campaigns, education and
support for lifestyle interventions.
In
terms of societal value, Novo Nordisk generates wealth and contributes to socioeconomic
development through sustainable business practices, investment and employment.
As a pharmaceutical innovator, the company provides knowledge, research and
development, and healthcare products. Outreach programmes such as Changing Diabetes®
and Changing Possibilities in Haemophilia®
improve awareness, diagnosis and treatment. Through
these efforts, Novo Nordisk aims to bring down the human, societal and financial
burden of diabetes. Read more about sustainable growth
on pp 38–40.
Social responsibility is
also about ensuring a healthy and engaging workplace for Novo Nordisk’s
employees. Novo Nordisk has global health and safety standards and policies
to ensure respect for the rights of all employees. Through the workplace wellness
programme, NovoHealth, the company also offers a healthy workplace and actively
promotes healthy lifestyles.
As
a global player, Novo Nordisk must also offer a diverse and inclusive working
environment. Diversity – in management teams and in functional units –
fosters innovative thinking, nurtures collaboration between people with different
perspectives and drives performance. Novo Nordisk’s Management has set
an ambitious long-term aspiration that all senior management teams must be diverse
in terms of gender and nationality.
Environmentally
responsible: doing more with less
Producing more with less
is not just sound household management; it is also a way to 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. There is also a focus on minimising outputs
in the form of
emissions such as CO2 and waste. The
ambition is to continue
to produce ‘more with less’ – more products to serve more people,
using less energy and water for production, and leaving less waste.
 |
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NOVO
NORDISK WAY
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. |
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| • |
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.
|
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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. |
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| 20 | OUR BUSINESS |
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Diabetes
–
an emergency in slow motion
Some emergencies
happen in a split second. Others take decades to develop and in some cases you
do not even realise what happened until you see it in the clear light of hindsight.
Diabetes is an emergency developing in slow motion. Whenever the International
Diabetes Federation (IDF) updates its figures on people affected by diabetes,
the numbers just get bigger. The latest estimates, published in November 2012,
say that today more than 371 million people have diabetes, diagnosed and undiagnosed,
of which 80% live in low- and middle-income countries. And if current trends
continue, IDF predicts that the number will rise to more than 550 million by
2030.
While
diabetes care has improved greatly in recent decades, there are still millions
of people dying from the disease annually – 4.8 million in 2012 according
to the IDF. Others are losing their eyesight or requiring amputations because
of poorly controlled diabetes. Some because they do not have access to medicine
or doctors who can tell them how to use it. Others because the treatment they
receive is inadequate. Yet others maintain too high blood sugar because they
fear the consequences of low blood sugar (hypoglycaemia), a common side effect
of insulin treatment. Findings from a landmark study in the UK showed that reducing
blood sugar levels by close to 1% may reduce diabetes-related deaths by more
than 20% and
reduce microvascular
complications by nearly 40%.1
Microvascular complications include diabetic retinopathy, which causes 10,000
cases of blindness annually in the US alone.2
Apart
from the effect diabetes has on the person with diabetes, the disease is becoming
a growing financial burden for society. It is estimated that diabetes caused
at least 471 billion US dollars in healthcare expenditure in 2012.3
The psychosocial
aspects of diabetes
The physical,
financial and emotional burden of diabetes across cultures and countries is
carried by the entire family, not just by the person with diabetes. This is
one of the initial results of Diabetes Attitudes, Wishes and Needs 2 (DAWN2™)
published in December 2012, which shows that:
| • | 63% of family members are anxious about the possibility that the person they live with will develop serious complications from the condition. |
| • | 66% of family members of insulin- treated people with diabetes fear that their loved one will become hypoglycaemic during the night. |
| • | 34% of family members report a negative financial impact on themselves due to the diabetes of their loved one. |
|
What is diabetes? Diabetes
is a metabolic disorder affecting the way our bodies use digested food
for growth and energy. Diabetes has two main forms: type 1 and type
2. |
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NOVO NORDISK ANNUAL REPORT 2012
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How is diabetes treated? For type 1 diabetes,
insulin is introduced at diagnosis and is required for the rest of the
person’s life. |
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NOVO NORDISK ANNUAL REPORT 2012
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Novo Nordisk is highly focused on proteins. Some researchers at the company have spent their entire careers immersed in one specific protein.
For 90 years,
Novo Nordisk has been researching proteins to treat what was originally an uncommon
disease, but which today has reached pandemic proportions: diabetes.
“Our
dedication to discover and develop better and better therapeutic proteins to
help people with diabetes is the red thread running through the company,”
explains Dr Mads Krogsgaard Thomsen, executive vice president and chief science
officer at Novo Nordisk. “Over many years we have developed a unique expertise,
which helps us to make both incremental changes and leaps forward so that our
medicines are getting more physiological and acting closer to what nature intended.
This requires decades of perseverance. While other companies might stop looking
for treatments for diabetes after launching one or two medicines, we are constantly
searching for new ways to improve our medicines further.”
Long-term
focus
In fact there
are very few, if any, companies with as great a focus on side chain protein
backbones and engineering as Novo Nordisk. “In the beginning we focused
on purifying insulin. Thereafter we realised that insulin needed to work for
longer, so we looked at how we could engineer this property into the product.
With the advent of our human insulin range, diabetes treatment became safer
and unlimited by slaughterhouse suppliers. Later, we developed our injection
pens to make it easier for people to inject insulin. At the same time, we
began to wonder how we could use protein technology to even more closely mimic
the action profile of insulin found naturally in the body of someone who doesn’t
have diabetes, and this is what we’re still working on today. We don’t
look five years into the future; we think in decades. And this long-term view
has helped us to produce generation after generation of insulin to improve
the lives of people with diabetes,” says Mads Krogsgaard Thomsen.
Mimicking
nature is not easy
Protein-based
biological medicines – therapeutic proteins – are significantly
different from ‘traditional’ chemical drugs: while these small molecules
usually block a target and therefore a process in the body around the clock,
large protein molecules such as insulin seek to stimulate a process at the
time it is needed. Mimicking nature in this way is not as easy as it perhaps
sounds. In a person without diabetes, insulin is released from the pancreas
straight into
the body’s circulation, giving a characteristic action profile of peaks
at meals and a steady basal level between meals and at night. But a person with
diabetes who needs insulin injects this protein directly under the skin. This
changed route of entry into the body results in a different action profile.
To mimic nature as closely as possible Novo Nordisk’s scientists therefore
have to study a protein in great detail to work out which amino acids can and
cannot be changed, in order to engineer particular properties into the molecule
without changing its characteristics unfavourably. Side chain attachments to
prolong the effect of the protein are also used to create the desired result.
In this way Novo Nordisk has designed a full range of insulins, including Tresiba®
(insulin degludec), the first once-daily basal insulin with an ultra-long duration
of action, and the world’s leading short-acting insulin NovoRapid®(NovoLog®
in the US).
The
company has also used its protein expertise to develop the leading human GLP-1
analogue, Victoza®,
but research does not stop there. Current projects in development include
a fixed-ratio combination of Tresiba®
and Victoza®(IDegLira)
and semaglutide, a once-weekly GLP-1 analogue for the treatment of type 2
diabetes. Further, Victoza®
is being investigated for use in type 1 diabetes as an adjunct therapy to
insulin. With 12 diabetes treatments in the pipeline, diabetes firmly remains
Novo Nordisk’s primary business. See the pipeline
on pp 30–31 for more information.
“We
have been working with this disease since it was considered a niche area that
only few seemed to care about,” explains Mads Krogsgaard Thomsen. “We
have a unique competence platform of research and are only now beginning to
understand how much more can be done for people with diabetes. And I think it’s
fair to say that our perseverance has paid off. You can see it in the number
and quality of projects in our pipeline, the number of patents we’re granted,
publications in leading scientific journals, and the new medicines we have launched.
What’s also worth noting is that we use the same expertise, knowledge and
technology to design proteins for haemophilia and growth hormone therapy.”
Passion,
pride and perseverance
To engineer
a protein to such a level of perfection takes a network of scientists who
understand that protein fully, including protein engineers,
pharmacologists,
chemists and clinicians. But Novo Nordisk does not have much difficulty attracting
and retaining the best people in these fields. “Working here is lots
of fun: we have a high level of expertise, we understand our area, our research
and development budgets are growing and we treat people with respect. So scientists
want to work here,” says Mads Krogsgaard Thomsen, referencing the prestigious
Science 2012 Top Employer survey in which Novo Nordisk ranked number 4, up
from ninth place in 2011.
“Our
scientists have a profound insight into the protein on which they’re
working. For example the scientist who invented Tresiba®
was working on this molecule for almost 30 years and is still invaluable in
this area. All our scientists share the company’s passion for proteins
and our drive to constantly improve our medicines. This thrill is ignited
when we see patients and doctors embrace our products. I think the bottom
line is we’re all proud of what we do.”
|
What is it? Proteins are large biological molecules consisting of one or more chains of amino acids in a specific sequence. Twenty different types of amino acids are commonly found in proteins and when combined in various ways they create millions of different proteins each with a specific function. Each cell in the human body contains thousands of different proteins, which together make the cell do its job. Some proteins are hormones that regulate various activities in the body. Insulin is a hormone that is produced by the beta cells in the pancreas. It is needed for moving sugar (glucose) from the bloodstream into some cells in the body, for example muscle cells. GLP-1 (Glucagon-Like Peptide-1) is a natural gut hormone that helps regulate glucose metabolism by stimulating beta cells to secrete insulin and by reducing glucagon secretion. GLP-1 also has effects on food intake and it may play a role in protecting the beta cells, a key to slowing diabetes progression. |
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NOVO NORDISK ANNUAL REPORT 2012
Insulin
treatment
is a balancing act
Every day is a balancing act for people with diabetes who use insulin: too little insulin will make blood glucose levels rise, which can cause long-term complications such as blindness and amputations; too much insulin can result in dangerously low blood sugar levels, which can ultimately lead to coma and death.
| The symptoms
of low blood sugar (hypogly-caemia) are immediate, very unpleasant and something
almost all people with diabetes try to avoid. Confusion, dizziness, trembling,
a pounding heart and sweating are among the typical early symptoms. If left
untreated, hypoglycaemia can lead to seizures or unconsciousness and, in
rare cases, permanent brain damage or death. So it is no surprise that many patients and doctors are reluctant to treat the blood sugar down to the levels recommended, for example by the American and European diabetes associations. They know that the closer the patient is to reaching the desired near-normal blood sugar level, the closer he or she also is to a state of hypoglycaemia. |
But maintaining blood sugar at higher-than-recommended levels comes at a price. Diabetes is a chronic disease, so while in the short term the side effects of high blood sugar may not have a great impact on quality of life, over time potentially irreversible damage is being done to the body. The
problems of a |
disease spectrum require different types of medications. But primary care physicians see many patients per day, perhaps over 100, so they have very little time to educate the patient about all the elements involved in good diabetes control, including medication, weight-appropriate diet, distribution of calories over the day, exercise and so on. There is therefore a tendency for the physician to prescribe the simplest treatment, even though it may not be appropriate or no longer match the stage of the disease. The next step in treatment is then not taken until the patient’s blood glucose level increases to an unacceptable level. This is what some refer to as the ‘treat to failure’ paradigm, which is sadly all too common.” |
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Reducing the risk
of hypoglycaemia
One way to reduce
the risk of hypoglycaemia – and thus allow for tighter blood sugar control
– is to develop ‘engineered’ insulins that more closely mimic
the way insulin acts in the body of a person without diabetes.
“One
of the challenges we’re trying to overcome when developing new and improved
insulin types is that insulin acts in a different way when injected compared
with when it’s secreted naturally into the bloodstream,” says Alan
Moses. “It takes time for injected insulin to pass through the subcutaneous
tissue into the blood vessels, and several factors, including the site of injection,
play a role in how fast the insulin is absorbed in the body and which tissues
it goes to first. This means that the insulin activity profile can vary significantly
from day to day in the same individuals.”
“When
Novo Nordisk launched human insulin in 1982 as the first company in the world,
we thought that we had developed the perfect insulin,” continues Alan
Moses. “I mean, it’s 100% identical to the insulin produced in the
body of a person who
doesn’t
have diabetes, so how could we do better? However, we came to realise that while
human insulin is indeed the perfect insulin when secreted naturally from the
pancreas, it’s far from perfect when injected, for the reasons I mentioned
before. That’s what led us into the research and development of insulin
analogues.”
Insulin
analogues are types of insulins that have been modified through genetic engineering
to either act faster or slower than human insulin. Novo Nordisk’s fast-acting
insulin analogue NovoRapid®(NovoLog®
in the US) was engineered to match the insulin peak seen in a person without
diabetes following a meal. However,
this type of insulin does not work long enough to provide an adequate basal
level of insulin for full 24-hour coverage. Long-acting insulin analogues
(basal insulin) were therefore developed to meet this need, but while they
have been shown to reduce the risk of low blood sugar (hypoglycaemia) compared
with human insulin, available insulin products are still associated with substantial
variability of absorption, which can result in low blood sugar (hypoglycaemia)
– most worryingly at night. Furthermore, these insulins are
required to be injected at the same time every day. That is why Novo Nordisk decided to develop Tresiba® (insulin degludec).
|
The
importance of good People
with diabetes should aim to keep their blood glucose (blood sugar) levels
as near normal as possible, in other words in the range of that of someone
without diabetes. The blood glucose target should be decided between
the patient and his or her doctor. |
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Insulin
in a tablet
– why is it so difficult?
Many companies have tried, and failed, to develop insulin in tablet form. So what makes Novo Nordisk think it can do any better?
|
Many people ask why
insulin and GLP-1 products such as Victoza®
(liraglutide) are not made in tablet form. The short answer is that it
is really difficult. Insulin and GLP-1 are amazing protein molecules,
but if taken orally they would ordinarily be attacked by digestive enzymes
in the gastrointestinal tract whose job it is to break down proteins,
which is useful for food uptake but detrimental if the protein is a drug
that needs to stay intact. And even if they were to somehow survive in
the stomach, these large molecules would then have difficulty passing
through the wall of the intestine and entering the bloodstream.
Convenience leads
to better outcomes |
a tablet-based
medication, for example metformin. What these medications have in common
is that their active substance is a small molecule – a chemical –
which is not broken down by enzymes in the gastrointestinal tract. However,
for many people with type 2 diabetes the disease eventually progresses
to a stage where insulin therapy is necessary to control the blood sugar.
But insulin injections are daunting for many, and patients must be educated
by healthcare professionals in order to administer insulin effectively
and safely. Progression to insulin injections is therefore often delayed,
with potential serious consequences for health in the long term.
Expert
knowledge |
is built on our 90
years of experience with the insulin molecule and 20 years of experience
with GLP-1. The scientists involved have been experts in the field for
decades. This is a clear strength for engineering and designing the molecules
for the oral route and is a major advantage over our competitors.” |
NOVO NORDISK ANNUAL REPORT 2012
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The pursuit of simplicity for patients is the driver of Novo Nordisk’s development of injection devices.
|
Novo
Nordisk invented the market for insulin injection devices with the launch
of the world’s first insulin pen in 1985. “NovoPen®
was designed and developed by a group of people who had a burning passion
for this project and they had the persistence to see it through,”
explains Jesper Kløve, senior vice president for Device R&D
at Novo Nordisk. Since then, Novo Nordisk has launched generation after
generation of pen devices, the latest being NovoPen® 5 (pending approval in the US), which in
July 2012 won the prestigious ‘Red Dot Best of the Best Design Award’.
“This was a huge accolade. To see our pen next to iconic products
such as Apple’s iPad and the redesigned Porsche 911 was fantastic,”
says Jesper Kløve.
|
Six
million FlexPen® users |
Novo Nordisk has also made progress with its first device for haemophilia treatment. In October 2012, a new prefilled syringe for delivering NovoSeven® was approved by both the European Medicines Agency and the US Food and Drug Administration. It is designed to make life easier for NovoSeven® users by making the injection process less cumbersome. Responding
to patients’ needs |
In July 2012, the latter won the
prestigious Red Dot Design Award.
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Imagine having to give a 3-year-old an intravenous infusion several times a week which takes up to 40 minutes and can be very painful.
|
When we talk about
the number of people with diabetes globally, we speak in the ballpark
of hundreds of millions. But the scenario for haemophilia is very different.
In fact, this is a small community of around 400,000 people globally,
with just over 160,000 of them having haemophilia A or B.1,2
Of those diagnosed, only about 25% receive optimal treatment.3 It started
with NovoSeven®
|
to the
product they are using to treat or prevent bleeding episodes. For about
3,500 patients worldwide, these inhibitors will eventually prevent the
treatment from working.3
Novo Nordisk addressed a huge unmet medical need when it launched NovoSeven®
(recombinant factor VIIa) in 1996 as a treatment for these people. It
was the first recombinant treatment available, as at the time other coagulation
factors were derived from blood plasma. Novo Nordisk has been working within the field of haemophilia for more than 20 years. Like diabetes, haemophilia is a chronic disease, and the skills needed to develop new therapies are very similar. “Our company has many years of experience in discovery, development, manufacturing and delivery of proteins, which gives us a big advantage,” says Anne Prener. One
project filed, two in phase 3, a fourth discontinued |
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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, which is called prophylactic treatment. People with haemophilia A may have either a decreased ability or total inability to produce clotting factor VIII. Those with haemophilia B have deficiencies in producing clotting factor IX. Around 3,500 people with haemophilia worldwide have high-titre inhibitors – resistance (due to antibody formation) – to their normal replacement treatment. Factor VIIa (NovoSeven®) was developed as a treatment for these people. 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. The first results from the study, which is supported by Novo Nordisk, were presented in July 2012. HERO is an initiative under the Changing Possibilities in Haemophilia® programme. It supports Novo Nordisk’s strategic objective to achieve leadership in haemophilia by improving the efficacy of prevention and treatment of bleeding episodes for all haemophilia patients. Read more about HERO and Changing Possibilities in Haemophilia® at novonordisk.com/about_us/improving_haemophilia/improving-haemophilia.asp. |
A third phase 3 project was discontinued in September 2012, when development of a fast-acting analogue of recombinant factor VIIa, vatreptacog alfa, was stopped due to safety concerns, as some patients in the phase 3 study developed antibodies to the product. Although all of these patients continued to respond well to treatment after having developed antibodies, there was still a potential risk that continued treatment would inhibit the effectiveness of the treatment over time. “This would be an unacceptable situation as, in almost 20 years of use, no haemophilia A or B patients have developed inhibitory antibodies to NovoSeven®,” says Anne Prener. The
dream |
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During 2012, Novo Nordisk made progress throughout the clinical development pipeline. This overview illustrates key development activities.
| Compound |
Indication
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Description
|
Phase 1 | Phase 2 | Phase 3 | Filed/ regulatory approval |
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| Diabetes care | ||||||||
| Diabetes | ||||||||
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| Tresiba® (insulin degludec) NN1250 |
Type
1 and 2
diabetes |
A new-generation
basal insulin with ultra-long duration of action of more than 42 hours.
Intended to offer a flexible treatment and a good safety profile. Approved
in the EU and Japan and under regulatory review in the US and other major
markets.
|
 |
|||||
|
|
||||||||
| Ryzodeg® (insulin degludec and insulin aspart) NN5401 |
Type
1 and 2
diabetes
|
A soluble
fixed combination 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 in the EU and Japan and under
regulatory review in the US and other major
markets.
|
|
|||||
|
|
||||||||
| IDegLira NN9068 |
Type
2
diabetes
|
A fixed-ratio
combination of insulin degludec and liraglutide intended to offer the
benefits of the two components in a single
preparation.
|
 |
|||||
|
|
||||||||
| 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.
|
 |
|||||
|
|
||||||||
| FIAsp NN1218 |
Type
1 and 2
diabetes
|
A faster-acting
formulation of insulin aspart (NovoRapid®).
|
 |
|||||
|
|
||||||||
| LATIN
T1D NN9211 |
Type
1
diabetes
|
Liraglutide,
a once-daily human GLP-1 analogue, intended to offer clinical benefits
as adjunct therapy to insulin.
|
|
|||||
|
|
||||||||
| OI338GT NN1953 |
Type
1 and 2
diabetes
|
A long-acting
oral basal insulin analogue intended as a tablet treatment.
|
|
|||||
|
|
||||||||
| OI362GT NN1954 |
Type
1 and 2
diabetes
|
A long-acting
oral basal insulin analogue intended as a tablet treatment.
|
|
|||||
|
|
||||||||
| OG217SC NN9924 |
Type
2
diabetes
|
A long-acting
oral GLP-1 analogue intended as a tablet treatment.
|
|
|||||
|
|
||||||||
| OG987GT NN9926 |
Type
2
diabetes
|
A long-acting
oral GLP-1 analogue intended as a tablet treatment.
|
|
|||||
|
|
||||||||
| OG987SC NN9927 |
Type
2
diabetes
|
A long-acting
oral GLP-1 analogue intended as a tablet treatment.
|
|
|||||
|
|
||||||||
| LAI287 NN1436 |
Type
1 and 2
diabetes
|
A long-acting
basal insulin analogue with potential for once-weekly dosing.
|
|
|||||
|
|
||||||||
| Obesity | ||||||||
|
|
||||||||
| Liraglutide
3 mg NN8022 |
Obesity
|
A once-daily
human GLP-1 analogue. Intended, as adjuvant to lifestyle changes (including
diet), to offer sustainable weight loss for people with severe obesity,
including those at particular risk of developing diabetes.
|
|
|||||
|
|
||||||||
NOVO NORDISK ANNUAL REPORT 2012
|
OUR
BUSINESS
|
31
|
|
|
|
|
Phase 1 Phase 2
|
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
|
or placebo for both safety and efficacy in order to firmly establish its benefit–risk relationship. Phase 3a covers trials conducted after efficacy of the medicine is demonstrated but prior to regulatory submission, whereas phase 3b covers clinical trials completed after regulatory submission. See more at novonordisk.com/investors and clinicaltrials.gov.
|
| Compound |
Indication
|
Description
|
Phase 1 | Phase 2 | Phase 3 | Filed/ regulatory approval |
||
| Biopharmaceuticals | ||||||||
| Haemophilia and other rare bleeding disorders | ||||||||
|
|
||||||||
| NovoThirteen® (rFXIII) NN1841 |
Congenital FXIII deficiency |
A recombinant coagulation factor XIII. Launched in the EU and Canada and approved in Switzerland. Submitted for marketing authorisation in the US and other larger markets. |
 |
|||||
|
|
||||||||
| Turoctocog alfa NN7008 |
Haemophilia A | A recombinant coagulation factor VIII intended to prevent and treat bleeds. Submitted for marketing authorisation in the US, EU, Japan, Australia and Switzerland. |
|
|||||
|
|
||||||||
| 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. |
|
|||||
|
|
||||||||
| mAb2021 NN7415 |
Haemophilia A, B and withinhibitors | A monoclonal antibody against Tissue Factor Pathway Inhibitor (TFPI) intended for bleeding prevention. |
 |
|||||
|
|
||||||||
| Growth disorders | ||||||||
|
|
||||||||
| NN8640 | Growth disorders |
A long-acting human growth hormone intended to offer less frequent injections. |
|
|||||
|
|
||||||||
| Inflammation | ||||||||
|
|
||||||||
| Anti-IL-20NN8226 | Rheumatoid arthritis | A recombinant human monoclonal antibody. The compound's novel mechanism of action is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. A phase 2b programme is ongoing. |
 |
|||||
|
|
||||||||
| Anti-IL-21 NN8828 |
Rheumatoid arthritis | A recombinant human monoclonal antibody. The compound’s novel mechanism of action is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. A phase 2a programme is ongoing. |
|
|||||
|
|
||||||||
| rFXIII NN8717 |
Ulcerative colitis |
A recombinant coagulation factor XIII. The study is investigating the biological and clinical effect on mucosal healing in patients with mild to moderate active ulcerative colitis. |
|
|||||
|
|
||||||||
| Anti-C5aR-151 NN8209 |
Rheumatoid arthritis | A recombinant humanised monoclonal antibody. The compound’s novel mechanism of action is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. |
|
|||||
|
|
||||||||
| Anti-C5aR-215 NN8210 |
Rheumatoid arthritis |
A recombinant human monoclonal antibody. The compound's novel mechanism of action 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. The compound’s novel mechanism of action 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. The compound’s novel mechanism of action is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. |
|
|||||
|
|
||||||||
NOVO NORDISK ANNUAL REPORT 2012
|
Novo Nordisk sells its products in more than 180 countries. Among them are the richest and poorest countries in the world, with healthcare systems ranging from well-developed to nonexistent. And yet, Novo Nordisk’s basic business model and strategy is the same in all countries, says Kåre Schultz, Novo Nordisk’s chief operating officer. Novo Nordisk has its own wholly owned country organisations – affiliates as they are called internally – in 75 countries, organised in five regions, each reporting to a senior vice president: Europe, North America, International Operations, Region China and Japan & Korea. The reporting lines meet at Kåre Schultz’s desk. Novo Nordisk’s business model and strategy is basically the same in all regions, |
and based on a common ambition, which is to be the leading diabetes care company, both in commercial terms and when it comes to making a positive change for people with diabetes. “Our core offering to people with diabetes all over the world is sophisticated proteins – biologic pharmaceuticals such as modern insulins – to which our scientists have been able to give some distinct properties that can help better control the disease,” says Kåre Schultz. “We market and sell the products the same way globally, which is by sharing the clinical knowledge about our products with doctors, so they can make an informed choice about whether they are right for their patients. At the same time, we present the payers – whether these are public health systems or private insurance |
companies
– with evidence about the cost-efficiency of our products so they
can make informed decisions about pricing and reimbursement. This is in
essence our business model all over the world.”
In many countries Novo Nordisk also engages in activities aimed at improving awareness about diabetes and training doctors in managing the disease. This work is much appreciated, especially in developing countries where diabetes has only recently become a serious problem and where there is not the knowledge or capacity to deal with the disease. “I see this as a long-term investment,” says Kåre Schultz. “It can take many years to create a sustainable business in these countries, but once the economy allows for proper diabetes care for the population, doctors and health authorities will remember that |
NOVO NORDISK ANNUAL REPORT 2012
|
Chief
Operating Officer Kåre Schultz (far left) |
|
||||
|
we were there for them when the going was tough. That’s our experience.” Competitors In the insulin market, Novo Nordisk’s main competitors are the same all over the world, Eli Lilly and Sanofi. In addition, there are local competitors in some countries such as China and India, but they primarily offer older-generation products and have not been able to gain significant market shares. In the biopharmaceuticals business, Novo Nordisk faces competition in some markets from producers of biosimilar medicines (products that are similar, but not identical to an original medicine), for example human growth hormone. But so far it has not had a dramatic impact on the business.
CONTINUED ► |
 |
 |
NOVO NORDISK ANNUAL REPORT 2012
| 34 | OUR BUSINESS |
|
|
|
|
The US is the world’s largest market for pharmaceuticals, accounting for approximately 34% of global sales. It took Novo Nordisk many years and several failed attempts to establish a successful presence there. But this was achieved around 10 years ago when Novo Nordisk launched its first modern insulins (insulin analogues) and NovoSeven® (a haemophilia product) in the US. At the same time, major investments were made in building a strong organisation, which today totals more than 5,000 people. Since then there has been no looking back. Today, North America is Novo Nordisk’s largest and fastest growing region by far. In 2012, the region accounted for 66% of Novo Nordisk’s total sales growth. And this picture will not change in the foreseeable future, predicts Kåre Schultz: “Diabetes is on the rise, and we have a range of great products on the market, even more promising products in our pipeline and an organisation that has proved it can meet our customers’ needs.” In his view there is still a major growth potential for Novo Nordisk’s current modern insulins and Victoza® (liraglutide): “Our insulin market share is still lower in the US than it is in many other countries, and I can’t see why this should be the case, especially when we launch Tresiba®. Another thing to keep in mind is that in the US, only around 35% of insulin is delivered in pen systems, such as
|
FlexPen®. In Europe, it’s close to 100%. This means there’s still a significant potential to upgrade treatment in the US.” In the GLP-1 market Victoza® is already the market leader. It is still a relatively small market but predicted to grow in the coming years, and Kåre Schultz believes there is a good chance Novo Nordisk will capture the lion’s share of this growth, not only with Victoza® but also with IDegLira (a fixed-ratio combination of insulin degludec and liraglutide) and semaglutide (a once-weekly GLP-1 analogue) which Novo Nordisk hopes to bring to the market some years from now. Prices Novo Nordisk has experienced increasing pressure on prices in recent years when bidding for large contracts with managed care organisations and with the government, and Kåre Schultz predicts this will continue. “I still think the US will remain the most attractive market in the world for a company such as ours, which is able to bring new and innovative products to the market. ”Unlike many other countries, the US is willing to pay for innovation. This means that new products get a higher premium than elsewhere. But once they go off patent, a competitive market for generics ensures that prices drop to a fraction of what they were before. And since many blockbuster drugs have lost patent protection in recent years, the net effect is that the total spend on pharmaceuticals isn’t growing.” When asked what – apart from good products – is the key to success in the US market, Kåre Schultz highlights the importance of having good people and a strong organisation. “Furthermore, we learned the hard way 10–20 years ago that if you don’t know every detail of how the US market functions, you don’t have a chance, because it’s extremely complex,” he says. “First you have to realise that it’s not one market, it’s a myriad of market segments. The largest segment, where prices are highest, is the managed care segment, which is financed through private health insurance paid by employers
|
or individuals. Then there is ‘Medicare Part D’, the government-subsidised health insurance for the elderly, operated by the same managed care organisations, where prices are lower. And Medicaid, the government-funded health offering for people with a low income. These are just a few of the segments. The point is that each segment has its own way of working, which you must really understand and respond well to. I think it’s fair to say that this is what we’re doing now.”
The sluggish economy in most European countries and the short-term cost containment measures that followed have made Europe a tough place for most pharmaceutical companies. In the largely publicly funded European healthcare systems, governments have been driving down prices, making it very challenging to obtain a price for new products that justifies the research and development costs. In addition, reimbursement restrictions often prevent innovative medicines from reaching patients. As a result, pharmaceutical companies have laid off thousands of employees in Europe in recent years. Novo Nordisk has been hit, too, with a total of 350 jobs cut in the European organisation in 2011 and 2012. “I don’t agree with the argument that, in the current economic climate, European countries can’t afford to pay for new and better products,” says Kåre Schultz. “To me, it’s a matter of priority. The most |
North
America
Europe
NOVO NORDISK ANNUAL REPORT 2012
|
worrying thing is that if nobody wants to pay a premium for innovation, then there’ll be no innovation, and Europe desperately needs innovative industries to drive future growth.” However, even in this difficult economic climate, Novo Nordisk managed to grow European sales by approximately 3% in 2012. Victoza® is the key growth driver in most European markets and it is likely to stay that way in the coming years. Longer term, Tresiba® (insulin degludec), which Novo Nordisk is launching in some European markets in 2013, will create additional growth, but it will take time for this product to penetrate the market – as it does for all new insulin products. Future growth rates In recent years there has been much speculation about whether producers of biosimilar insulin (insulin which is similar but not identical to the original) would enter the European market on a large scale. So |
far this has not happened, and Kåre Schultz doubts it will. “Insulin prices are already very low in many countries and I think the biosimilar insulin producers have concluded that it’s an unattractive market to enter.” “Thinking of International Operations as a region requires a stretch of the imagination,” says Kåre Schultz. “We’re talking about 149 countries all over the world with more than 4 billion people – Latin America, Africa, Middle East, the Gulf, most of Asia and Australia. Here you will find some of the world’s poorest countries and some of the world’s richest – it’s a region of extraordinary diversity. This means we must be able to meet the demand for both standard therapy in the form of human insulin in vials at rock-bottom prices and advanced modern insulin products in sophisticated pen
|
systems, which are sold at prices similar to those seen in Europe and the US.” Even within many of the countries, there are diverse markets. Brazil, for example, has both a public tender market for human insulin vials, a mid-price market where Novo Nordisk delivers to the social security system and a private market for high-end products for people who either have private insurance or can pay out of pocket. What the countries have in common is that the incidence of diabetes is increasing, and many of them are enjoying economic growth way above what is seen in the Western world. This means they can afford to extend the reach and quality of their healthcare systems. Indonesia and Brazil are two examples from different parts of the world. In both countries, people demand or expect that some of the economic growth is translated into better healthcare for them. And there’s a political will to do so. Kåre Schultz expects this development to continue: “I can’t see why not. With the increasing urbanisation and wealth in all these countries, diabetes rates will continue to increase. And most of the countries have good prospects for continued economic growth and will continue to invest in better healthcare, including diabetes care. Keep in mind that healthcare spend per capita in most countries in International Operations is only a fraction of what it is in Europe or Japan – both in absolute terms and relative to GDP”. (See table on p 37.)
CONTINUED ► |
International
Operations 
NOVO NORDISK ANNUAL REPORT 2012
|
Novo Nordisk’s experience is that when economies develop further, the healthcare systems offer treatment for more diseases and conditions. As a result, sales of NovoSeven® and Norditropin®(human growth hormone) are showing growth in many countries in International Operations. And Kåre Schultz believes that Victoza® will eventually become a big product in these countries. “Sure, it will take years, because initially the product won’t be reimbursed, so only people who can afford to pay for it themselves will be able to get it. But in many countries it will eventually be reimbursed or partly reimbursed by the healthcare system, and then I think we’ll see the same market penetration for Victoza® as we’re currently seeing in Europe and North America.” Growth opportunities In terms of organisation, Novo Nordisk’s strategy is – and has always been – to establish an organisation very early – as soon as there are signs of a market |
developing. The organisation is expanded gradually as the market develops. Vietnam and Peru are examples of countries where Novo Nordisk is building a bigger presence right now. “And we do it organically,” says Kåre Schultz. “Unlike many other international pharma companies, we’re not believers in building a presence through acquisition of local companies. We prefer to hire our own people and train them to become the best.” Japan, the big brother in this two-country region, was for many years Novo Nordisk’s largest market in terms of sales. Today, it is number two after the US, just ahead of China. But as in Europe, Japan’s economy is in trouble; the population is ageing, and Novo Nordisk has a high insulin market share. Not the best conditions for growing a business, and Kåre Schultz admits it
|
will be difficult to achieve more than low single-digit growth in the coming years. Nevertheless, despite market share losses in recent years, Novo Nordisk is the clear insulin market leader in Japan with a 55% market share measured in volume. It is also number one in the growth hormone market with Norditropin®, which is delivered in the new-generation pen system FlexPro®, and the company is doing well with NovoSeven® and Victoza®. In the Japanese insulin market, competition is most intense in the long-acting (basal) insulin segment, where competitors have made inroads in recent years. Soon, Novo Nordisk expects to launch Tresiba®. Kåre Schultz is confident that Tresiba®will help stabilise Novo Nordisk’s position in the short term and, over time, grow the company’s insulin market share in Japan: “Tresiba® changes the competitive situation,” he says. “Studies have shown that, when compared with insulin glargine, Tresiba® gives the same level of blood glucose reduction with a significantly lower rate of hypoglycaemia during the night. In addition, we will make it available in FlexTouch®, our latest prefilled insulin pen, which is well suited for the very sophisticated Japanese market, where 98% of our insulin is delivered in pen systems.” |
Japan
& Korea 
NOVO NORDISK ANNUAL REPORT 2012
|
OUR
BUSINESS
|
37
|
|
|
|
|
China became its own business region for Novo Nordisk in 2011, reflecting its large and growing strategic importance for the company: as a market for diabetes products, as an attractive production base and as a source of scientific innovation. With more than 90 million people with diabetes, China has the dubious distinction of being the country with the most people affected by this disease. It has not always been that way, but with economic growth comes urbanisation, with urbanisation come sedentary lifestyles – and then diabetes follows. This is the same pattern seen in other rapidly developing countries, but obviously on a much larger scale in a |
country with an aging population of 1.3 billion. On top of this, there is another problem: 20 years ago very few doctors in China knew how to treat diabetes, and outside the bigger cities this is often still the case. Novo Nordisk established its own affiliate in China in 1994 and to this day, the company’s main focus has therefore been to educate doctors and patients on proper diabetes care, including how to use insulin effectively and safely. A recent analysis demonstrated that between 2006 and 2010 Novo Nordisk and partners trained 55,000 doctors and 280,000 patients in China. Along the way, the company established itself as the market leader, today holding a 37% share of the diabetes market measured in value. It is a high priority for the Chinese government to improve the quality and reach of the country’s healthcare system. “As a result, many more people today have access to diabetes care, especially in the large cities. And the government’s ambition is to make similar improvements in smaller cities and in rural areas,” says Kåre Schultz, noting that, in China, ‘smaller cities’ often have more than a million inhabitants. “But it takes time to make these improvements, because of the size of the country and because the healthcare system is a complex environment with many interests and decision-makers. In China, the central
|
state government, the provinces, cities and counties all play a role. Understanding the structure of China’s healthcare system is essential.” Pressure on prices Drugs on the Essential Drug Lists are primarily older products which have gone off patent, such as human insulin. But there will still be a growing market for newer and higher priced pharmaceuticals in China, predicts Kåre Schultz: “The health awareness and purchasing power of many Chinese families is growing, and they’re willing to pay for – or have private health insurance that covers – the newer and more innovative treatments. That’s why I think that, over time, a treatment like Victoza®will become very big in China.”
|
|||
|
|
|
|
|
|
Region
China 
NOVO NORDISK ANNUAL REPORT 2012
| 39 | ||||||||
| Novo Nordisk’s largest production site in Kalundborg, Denmark, is an example of sustainable growth in practice. | ||||||||
|
slowdown,
the company attracts more attention. Accountable and transparent performance
management and reporting remains an important way to earn the trust of
stakeholders. “We need to walk the talk in everything we do,”
says Lise Kingo. “There is growing regulatory scrutiny into pharmaceutical
companies’ compliance with rules and regulations for clinical trials,
patient safety, product quality and business ethics. And companies must
be able to disclose how they – and their suppliers – live up
to regulatory requirements.” Health
for all
|
income
countries that account for only 20% of total global healthcare spending.
Diabetes prevalence is growing most rapidly in SouthEast Asia and Africa,
and is hitting young people at their most productive age, even children
and adolescents.
|
our
‘NextSix’ markets: Columbia, Egypt, Indonesia, Malaysia, Vietnam
and Ukraine. CONTINUED ►
|
||||||
 |
||||||||
|
20 years in the
business
|
Novo Nordisk co-hosted an event that dealt with one of the new challenges: Next Generation Living – the links between healthy living and sustainability. “In this light we were particularly pleased to see that prevention, detection and treatment of non-communicable diseases, such as diabetes, were included in the outcome document as a priority for policymakers as part of the sustainability agenda. Just as importantly, business is now invited to the table to help come up with solutions to the global issues, and Novo Nordisk has been invited to team up with other global leaders in the UN process of defining a set of global sustainability goals. Partnerships will be the name of the game, and we are keen to play our part,” says Lise Kingo. The conference marked the 20th anniversary of the 1992 Earth Summit in Rio, which was a turning point that brought environmental issues onto the international political agenda. For Novo Nordisk, it also marked the start of the company’s commitment to sustainable development. |
|||||||
| 40 | OUR BUSINESS |
|
|
|
|
of healthcare
professionals in China, Brazil and India. Now the time has come to scale
up through a novel train-the-trainer concept so we can broaden our reach
through education,” Lise Kingo points out. |
surveys. The next step is to translate these insights into new solutions for improved care and self-management in collaboration with global and local partners.” Engaged
people drive performance Documenting
value creation |
will
scale up our efforts to be a sustainable business, and through the Blueprint
for Change programme we will document how these activities create value
for our business, society and patients,” says Lise Kingo.
|
||||
|
365 days a year On World Diabetes Day Novo Nordisk employees around the world took part in activities to raise awareness about diabetes, how it can be effectively treated and how it can be prevented. This effort goes on throughout the year, as corporate programmes or local initiatives, and often with external partners. Novo Nordisk’s Changing Diabetes® programmes address needs for improved access for proper care to people with diabetes throughout the world. Learn more at novonordisk. com/ about_us/changing-diabetes/ CD_programmes.asp. |
 |
|||||
World Diabetes Day 2012: People form a blue circle – the international ‘unite for diabetes’ symbol – around the independence monument El Ángel, Mexico City.
NOVO NORDISK ANNUAL REPORT 2012
|
“That’s
how it is: with every big opportunity comes a risk,” says Jesper
Brandgaard. “I would be more worried if we were unable to continuously
develop new opportunities – if for some reason our researchers ran
out of ideas for new and better products. Fortunately, I see no signs
of this happening.” Competition
in the |
GLP-1
product) being the company’s key growth driver in 2012, any new moves
by competitors in the insulin and GLP-1 markets may pose new risks for
Novo Nordisk. Jesper Brandgaard mentions a few developments to which he
is paying particular attention: The
threat of biosimilars? |
“The
regulatory hurdles of getting a complex molecule such as factor VIIa,
the active molecule of NovoSeven®
,
approved in Europe, the US and Japan are high, so I don’t see biosimilar
producers as a major threat in these markets,” says Jesper Brandgaard.
“Competition will primarily come from established producers such
as Baxter and Bayer, who are developing their own versions of factor VIIa.
|
||||||
 |
||||||||
|
43
|
|||||||
|
Risk overview |
|||||||
|
Listed below are the main types of risks that Novo Nordisk faces. Many are an inherent part of being a pharmaceutical company. For some specific risks, reference is made to notes in the consolidated statements. Market risks |
costs and supply logistics, Novo Nordisk has established production capacity on five continents. Quality and safety
issues Financial risks |
Business
ethics and legal risks Business ethics violations and patent disputes are the main risks in this area. The pharmaceutical industry is tightly regulated in many respects, including when it comes to the claims it may make about its products and how it may interact with doctors and other healthcare professionals. To minimise the risk of violation of such 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 paid 25 million US dollars, but denied any wrongdoing. In addition to the financial settlement related to marketing practices in the US regarding NovoSeven®, as part of the agreement with the US Department of Justice, our 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, our US affiliate has added additional reporting and other procedures to its already robust compliance programme. Protection of intellectual property in the form of patents is a very important tool 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. For information on Novo Nordisk's risk policy and risk management process, please visit novonordisk.com/ about_us/corporate_governance/risk_ management.asp. |
|||||
| • | Negative effects on sales from pricing and reimbursement reforms enacted by governments. Europe, China and the US are all main markets for Novo Nordisk where such reforms are being implemented. | ||||||
| • | New products from established competitors. | ||||||
| • | Increased competition from producers of biosimilar medicines in key markets. | ||||||
|
Delays or failure
of pipeline products Supply disruptions |
|||||||
| 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 Novo Nordisk’s B shares. Share
capital and ownership 1. Calculated using shareholders’ registered home country. |
by the Novo Nordisk Foundation. The Novo Nordisk Foundation has a dual objective: to provide a stable basis for commercial and research activities conducted by the companies within the Novo Group (of which Novo Nordisk is the largest), and to support scientific and humanitarian purposes. More information on share capital is included in note 4.1 on pp 75–76. According to the Articles of Association of the Foundation, the A shares cannot be divested. As of 31 December 2012, Novo A/S also held nominal value DKK 35,312,800 of B share capital. Each A share (nominal value 1 Danish krone) carries 1,000 votes, and each B share (nominal value 1 Danish krone) carries 100 votes. With 25.5% of the total share capital, Novo A/S controls 73.5% of the total number of votes, excluding Novo Nordisk’s stock of treasury shares. Novo Nordisk’s B shares are traded in units of DKK 1 and the ratio of Novo Nordisk’s B shares to ADRs is 1:1. The B shares are issued to the bearer but may, on request, be registered in the holder’s name in Novo Nordisk’s register of shareholders. As Novo Nordisk’s B shares are in bearer form, no official record of all shareholders exists. Based on available sources of information about the company’s shareholders as of 31 December 2012, it is estimated that shares were distributed as shown in the charts on this page. As of 31 December 2012, the free float of listed B shares was 88.3%, which excludes the Novo A/S holding and treasury shares. The
capital structure |
implemented in the previous 12-month period. 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. For the next 12 months, Novo Nordisk has decided to implement a new share repurchase programme with an expected total repurchase value of B shares amounting to a cash value of up to DKK 14 billion. Novo Nordisk expects to implement the majority of the new share repurchase programme according to the Safe Harbour Regulation. At the 2013 Annual General
1. Dividend
for the year as a percentage of net profit. |
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Meeting, the Board of Directors will propose a further reduction of the company’s B share capital, corresponding to approximately 1.8% of the total share capital, by cancellation of 10 million treasury shares. After implementation of the share capital reduction, Novo Nordisk’s share capital will amount to DKK 550,000,000 divided into an A share capital of DKK 107,487,200 and a B share capital of DKK 442,512,800. 2013
restricted stock unit programme It is estimated that 474,000 shares will be needed for the programme. The costs of the programme – approximately DKK 440 million – will be amortised over the period 1 January 2013 to 1 April 2016. No dividends will be paid on the restricted stock units and the holders will have no voting rights until the restricted stock units are converted to shares in 2016. Share
price performance The company’s share price development reflects a leading position in the growing diabetes care market, coupled with a continued improvement in operating margin and encouraging progress within research and development (see p 8 for further details on operating performance and pp 30–31 for further details on research and development pipeline developments). |
The total market value of Novo Nordisk’s B shares, excluding treasury shares, was DKK 399 billion at the end of 2012. Payment
of dividends At the 2013 Annual General Meeting, the Board of Directors will propose a 29% increase in the dividend for 2012 to DKK 18 per A and B share of 1 krone, as well as for ADRs. Novo Nordisk does not pay a dividend on its holding of treasury shares. The proposed dividend corresponds to a payout ratio of 45.3%. For 2011, the payout ratio was also 45.3%. Shareholders’ enquiries concerning dividend payments and shareholder accounts should be addressed to Investor Service (see back cover). Communication
with shareholders Analyst
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NOVO NORDISK ANNUAL REPORT 2012
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Corporate governance is the system by which companies are directed and controlled. For Novo Nordisk, this includes securities laws and corporate governance standards in both Denmark and the US, the two countries in which the company’s shares are listed. The company’s corporate governance also includes the internal values-based management system called the Novo Nordisk Way. Novo Nordisk’s B shares are listed on NASDAQ OMX Copenhagen, and on the New York Stock Exchange 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. Novo Nordisk adheres to the majority of the Danish Corporate Governance Recommendations, with the following exceptions: |
• The
Board of Directors has not established a remuneration committee. The reasons for deviating from these recommendations are given on pp 48 and 51. Novo Nordisk is a foreign listed private issuer and is in compliance with the corporate governance standards of the New York Stock Exchange applicable to foreign listed private issuers. 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. See p 19 for more information about the Novo Nordisk Way. Novo Nordisk is part of the Novo Group (see p 44) 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. Governance
structure Shareholders have ultimate authority over the company and exercise their right 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 |
NOVO NORDISK ANNUAL REPORT 2012
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attached to A shares include pre-emptive subscription rights in the event of an increase of the A share capital, preemptive 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. 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 on behalf of shareholders and 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 general meeting and recorded in the meeting minutes. For minutes from the annual general meeting, see novonordisk.com/about_us. The Board of Directors has 12 members, eight of whom are elected by shareholders at general meetings and four by employees in Denmark. Shareholder-elected board
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members serve a 1-year term and may be re-elected. Members must retire at the first general meeting after reaching the age of 70. Four of the eight shareholder-elected board members are independent as defined by the Danish Corporate Governance Recommendations. See p 53. A proposal for nomination of board members is presented by the Chairmanship 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. The self-assessment and the Board of Directors’ competence profile are used in the nomination process. 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 eight shareholder-elected board members are non-Danes. The self-assessment conducted in 2012 |
resulted in a further development of the strategy process and a continued focus on succession preparedness. 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 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 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 4-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 2012. Chairmanship The annual general meeting directly elects the chairman and vice chairman of the |
CONTINUED ►
NOVO NORDISK ANNUAL REPORT 2012
| 48 | GOVERNANCE, LEADERSHIP AND SHARES |
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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, recommending the remuneration of board members and Executive Management, and proposing candidates for election at a general meeting. In practice, the Chairmanship has the roles and responsibilities of nomination and remuneration committees, and presents recommendations to the Board of Directors. The Board of Directors has not formally established separate committees, and as a result does not conform to the Danish Corporate Governance Recommendations. This is due to the fact that the Board of Directors finds that each board member must have the opportunity to contribute actively to discussions and have access to all relevant information on nomination and remuneration. In March 2012, the annual general meeting re-elected Sten Scheibye as chairman and Göran Ando as vice chairman. See novonordisk.com/about_us for a report on the Chairmanship’s activities. Audit Committee The three members of Novo Nordisk’s Audit Committee are elected by the Board of Directors from among its members. All members qualify as independent and have been designated as financial experts as defined by the US Securities and Exchange Commission (SEC). Under Danish law, all members qualify as financial experts and two of the members also qualify as independent. |
The Audit Committee assists the Board of Directors with oversight of the external auditors, the internal audit function, complaints regarding fraud or violations of business ethics, the financial, social and environmental reporting process, business ethics compliance and post-investment reviews, and in 2012 it was agreed that the Audit Committee also assists with oversight of long-term incentive programmes. In March 2012, the Board of Directors elected Hannu Ryöppönen as chairman and Kurt Anker Nielsen and Liz Hewitt as members of the Audit Committee. See novonordisk. com/about_us for a report on the Audit Committee’s activities. Executive Management The Board of Directors has delegated responsibility for day-to-day management of Novo Nordisk to its Executive Management. Executive Management consists of the president & chief executive officer plus four executives. They are responsible 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 |
reporting processes are audited by an independent auditor 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 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 must approve the appointment, remuneration and dismissal of the head of the internal audit function. Three other types of assurance activities – 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. |
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Novo Nordisk aims to attract, retain and motivate talented individuals. The company’s remuneration is therefore designed to be competitive. Remuneration rewards short- and long-term performance and is aligned with shareholder interests. 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 and complexity. The results are presented to Novo Nordisk’s 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, 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 Variable
remuneration 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
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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. The aggregate maximum amount that may be granted as an incentive for a given year is currently equal to 14 months’ fixed base salary plus pension contribution. 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 Cash-based
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Board of Directors
In 2012, the base fee for members of the Board of Directors was DKK 500,000 (DKK 500,000 in 2011).
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| Sten Scheibye (chairman of the Board) | 1.5 | – | – | 1.5 | 1.5 | – | – | 1.5 | ||||||||
| Göran Ando (vice chairman of the Board) | 1.0 | – | 0.1 | 1.1 | 1.0 | 0.1 | 0.1 | 1.2 | ||||||||
| Hannu Ryöppönen (chairman of the Audit Committee) | 0.5 | 0.4 | 0.1 | 1.0 | 0.5 | 0.3 | 0.1 | 0.9 | ||||||||
| Liz Hewitt1 (member of the Audit Committee) | 0.4 | 0.2 | 0.1 | 0.7 | – | – | – | – | ||||||||
| Kurt Anker Nielsen (member of the Audit Committee) | 0.5 | 0.3 | – | 0.8 | 0.5 | 0.5 | – | 1.0 | ||||||||
| Bruno Angelici1 | 0.5 | – | 0.1 | 0.6 | 0.4 | – | 0.1 | 0.5 | ||||||||
| Henrik Gürtler | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Thomas Paul Koestler1 | 0.5 | – | 0.3 | 0.8 | 0.4 | – | 0.2 | 0.6 | ||||||||
| Anne Marie Kverneland | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Ulrik Hjulmand-Lassen | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Søren Thuesen Pedersen | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Stig Strøbæk | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Jørgen Wedel2 | 0.1 | 0.1 | 0.1 | 0.3 | 0.5 | 0.3 | 0.3 | 1.1 | ||||||||
| Pamela J Kirby2 | – | – | – | – | 0.1 | – | – | 0.1 | ||||||||
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| Total | 7.5 | 1.0 | 0.8 | 9.3 | 3 | 7.4 | 1.2 | 0.8 | 9.43 | 3 | ||||||
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| 1. | Bruno Angelici and Thomas Paul Koestler were first elected at the Annual General Meeting in March 2011, and Liz Hewitt was first elected at the Annual General Meeting in March 2012. |
| 2. | Pamela J Kirby resigned as of March 2011. Jørgen Wedel resigned as of March 2012. |
| 3. | In addition social security taxes have been paid by Novo Nordisk amounting to less than DKK 1 million (less than DKK 1 million in 2011). |
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Share-based
incentives 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. 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. Non-financial targets are typically related to achievement of specific milestones within research and development, such as execution of trials, obtainment of product approvals and product launches, or within sustainability related to patients, environment, company reputation and development of employees. The total number of non-financial targets varies, but consists typically of 10-15 targets within 5–6 categories. If the financial target is met for economic
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profit, and at least 85% performance on sustainability targets and research and development targets respectively, then the allocation to the joint pool would correspond to four months’ base salary plus pension contribution for the Senior Management Board. The pool is capped at eight months’ base salary plus pension contribution. 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. 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. Pension
Other
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1. The interval 35–55% states the span between “maximum performance” and “on-target performance”.
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In addition, executives may participate in employee benefit programmes such as employee share purchase programmes. Severance
payment Current employment contracts allow |
severance payments of up to 36 months’ fixed base salary plus pension contributions in the event of a merger, acquisition or takeover of Novo Nordisk. 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. For 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. |
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Remuneration of the Executive Management and other members of the Senior Management Board
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| Lars Rebien Sørensen | 8.4 | 2.9 | 2.8 | 0.3 | – | 14.4 | 7.3 | 3.1 | 2.7 | 0.3 | – | 13.4 | ||||||||||||
| Jesper Brandgaard | 4.8 | 1.6 | 1.6 | 0.3 | – | 8.3 | 4.5 | 1.5 | 1.5 | 0.3 | – | 7.8 | ||||||||||||
| Lise Kingo | 4.3 | 1.1 | 1.4 | 0.3 | – | 7.1 | 4.1 | 1.4 | 1.3 | 0.3 | – | 7.1 | ||||||||||||
| Kåre Schultz | 5.2 | 1.4 | 1.7 | 0.3 | – | 8.6 | 4.9 | 1.7 | 1.7 | 0.3 | – | 8.6 | ||||||||||||
| Mads Krogsgaard Thomsen | 4.8 | 1.6 | 1.6 | 0.3 | – | 8.3 | 4.5 | 1.9 | 1.5 | 0.3 | – | 8.2 | ||||||||||||
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| Executive Management in total | 27.5 | 8.6 | 9.1 | 1.5 | – | 46.7 | 25.3 | 9.6 | 8.7 | 1.5 | – | 45.1 | ||||||||||||
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| Management Board in total1 | 72.1 | 3 | 25.0 | 22.3 | 8.4 | – | 127.8 | 70.8 | 3 | 26.3 | 22.4 | 10.8 | – | 130.3 | ||||||||||
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| Joint pool2 | 73.1 | 73.1 | 56.9 | 56.9 | ||||||||||||||||||||
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| 1. | The total remuneration for 2012 includes remuneration to 26 senior vice presidents (26 in 2011) of which none has retired or left the company in 2012 (one in 2011). The 2011 remuneration for the retired senior vice president is included in the table above, whereas a cash settlement of DKK 5 million is not included. |
| 2. | The joint pool 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 time of establishment of the joint pool, approximately 30% of the pool will be allocated to the members of Executive Management and 70% to other members of the Senior Management Board (2011: 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. |
| 3. | Including social security taxes paid amounting to DKK 1.5 million (DKK 1.7 million in 2011). |
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Management’s long-term incentive programme
The shares allocated to the joint pool for 2009 (177,066 shares) were released to the individual participants subsequent to the approval of the Annual Report 2012 by the Board of Directors and the announcement on 31 January 2013 of the full-year financial results for 2012. Based on the share price at the end of 2012, the value of the released shares is as follows:
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Value
as at 31 December 2012 of shares released on 31 January 2013
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Market
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| Executive Management | ||||
| Lars Rebien Sørensen | 15,764 | 14.5 | ||
| Jesper Brandgaard | 10,501 | 9.6 | ||
| Lise Kingo | 10,501 | 9.6 | ||
| Kåre Schultz | 10,501 | 9.6 | ||
| Mads Krogsgaard Thomsen | 10,501 | 9.6 | ||
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| Executive Management in total | 57,768 | 52.9 | ||
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| Other members of the Senior Management Board in total2 | 105,848 | 97.0 | ||
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| 1. | The market value of the shares released in 2013 is based on the Novo Nordisk B share price of DKK 916.50 at the end of 2012. |
| 2. | In addition, 13,450 shares (market value: DKK 12.3 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 22,012 in 2012 (DKK 21,841 in 2011), as a board member of DONG Energy A/S until 18 April 2012, from which he received remuneration of DKK 87,500 in 2012 (DKK 175,000 in 2011), as a member of the Supervisory Board of Bertelsmann AG, from which he received remuneration of EUR 129,000 in 2012 (EUR 85,000 in 2011) and as board member of Thermo Fisher Scientific Inc, from which he received remuneration of USD 219,840 in 2012 (USD 58,022 in 2011; adjusted by USD 58,022 after final confirmation of 2011 remuneration). Jesper Brandgaard serves as chairman of the Board of Directors of SimCorp A/S, from which he received remuneration of DKK 801,846 in 2012 (DKK 753,455 in 2011). Kåre Schultz serves as a board member of LEGO A/S, from which he received remuneration of DKK 300,000 in 2012 (DKK 300,000 in 2011). 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 2012 (DKK 625,000 in 2011). Until January 2013, Mads Krogsgaard Thomsen served as a board member of Cellartis AB, from which he received remuneration of SEK 50,000 in 2012 (SEK 50,000 in 2011). As of 1 January 2012, Mr Thomsen also serves as a board member of Copenhagen University, from which he received remuneration of DKK 79,800 in 2012.
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Sten Scheibye (chair) Formerly President and CEO of Coloplast A/S, Denmark (retired). Member of the Board of Novo Nordisk A/S in 2003, vice chairman in 2004 and chairman since 2006. Management duties: Trade Council of Denmark (chair), the Danish Industry Foundation (chair), the Denmark-America Foundation (chair), the Danish Fulbright Commission (vice chair), member of the boards of the Novo Nordisk Foundation, Rambøll Gruppen A/S, Dades A/S, RM Rich. Müller A/S, the Rich. Müller Foundation, the Aase and Ejnar Danielsen Foundation and the Knud Højgaards Foundation, all in Denmark. Special competences: Knowledge of the healthcare industry, particularly in relation to patients requiring chronic care, and managerial skills relating to international organisations. Education: BComm (1983) from Copenhagen Business School, Denmark, PhD in Organic Chemistry (1981) and MSc in Chemistry and Physics (1978), both from the University of Aarhus, Denmark.
Göran Ando (vice chair) Formerly CEO of Celltech Group plc, UK (retired). Member of the Board of Novo Nordisk A/S in 2005 and vice chairman since 2006. Management duties: Symphogen A/S, Denmark (chair), member of the boards of Novo A/S, Denmark, and Molecular Partners AG, Switzerland. Member of the Scientific Advisory Board of Bausch & Lomb, US, and 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. |
Bruno Angelici Formerly executive vice president of AstraZeneca (retired). Member of the Board of Novo Nordisk A/S since 2011. Management duties: Member of the boards of Smiths Group plc, 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 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. Management duties: Novozymes A/S (chair), Copenhagen Airports A/S (chair) and COWI Holding A/S (chair), all in Denmark. Special competences: Knowledge of the Novo Group’s business and its policies, and knowledge of the international biotech industry. Education: MSc in Chemical Engineering (1976) from the Technical University of Denmark. |
Liz Hewitt Formerly Group Director Corporate Affairs for Smith & Nephew plc, UK (retired). Member of the board of Novo Nordisk A/S since 2012. Member of the Audit Committee of Novo Nordisk A/S since 2012. Management duties: Member of the board and audit committee (chair) of Synergy Health plc, UK. External member of the audit committee of the House of Lords, UK. Education: BSc (Econ) (Hons) (1977) from University College London, UK, and FCA (Institute of Chartered Accountants) (1982). Special competences: Extensive experience within the field of medical devices, significant financial knowledge and knowledge of how large international companies operate. Ulrik Hjulmand-Lassen Senior IT quality advisor in IT Governance. 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. Thomas Paul Koestler Executive with Vatera Holdings LLC, US. Member of the Board of Novo Nordisk A/S since 2011. Management duties: Member of the boards of Momenta Pharmaceuticals Inc., ImmusanT Inc., Arisaph Pharmaceuticals Inc., Rib-X Pharmaceuticals Inc., and Pearl Therapeutics Inc., all in the US. Chairman |
NOVO NORDISK ANNUAL REPORT 2012
|
GOVERNANCE,
LEADERSHIP AND SHARES
|
53
|
|
|
|
|
of the
Scientific Advisory Board of Bausch & Lomb, USA.
Anne Marie Kverneland Laboratory technician, currently working as a full-time shop steward. Member of the Board of Novo Nordisk A/S since 2000. Education: Degree in Medical Laboratory Technology (1980) from the Copenhagen University Hospital, Denmark.
Kurt Anker Nielsen Formerly CFO and deputy CEO of Novo Nordisk A/S. CEO of Novo A/S, Denmark, from 2000 to 2003 (retired). Member of the Board of Novo Nordisk A/S since 2000. Member of the Audit Committee of Novo Nordisk A/S since 2004 (chair 2004–2012). Management duties: Dalhoff Larsen & Horneman A/S (chair), Collstrop’s |
Mindelegat
(chair), Novozymes A/S (vice chair), and member of the boards of the Novo
Nordisk Foundation, Veloxis Pharmaceuticals A/S and Vestas Wind Systems
A/S, all in Denmark. Chairman of the audit committees of Novozymes A/S,
Veloxis Pharmaceuticals A/S and Vestas Wind Systems A/S, all in Denmark. Søren Thuesen Pedersen Currently working as an 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 Formerly CFO and deputy CEO of Stora Enso Oyj, Finland (retired). Member of the |
Board
of Novo Nordisk A/S since 2009. Chairman of the Audit Committee of Novo
Nordisk A/S since 2012 (member since 2009). Stig Strøbæk Electrician, currently working as a full-time shop steward. Member of the Board of Novo Nordisk A/S since 1998. 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
|
Date
of birth
|
Independence1
|
|
|
|
|
|
|
|
|
Sten
Scheibye (m)
|
2003
|
2013
|
Danish
|
October
1951
|
Not
independent2
|
|
Göran
Ando (m)
|
2005
|
2013
|
Swedish
|
March
1949
|
Not
independent2
|
|
Bruno
Angelici (m)
|
2011
|
2013
|
French
|
April
1947
|
Independent
|
|
Henrik
Gürtler (m)
|
2005
|
2013
|
Danish
|
August
1953
|
Not
independent2
|
|
Liz
Hewitt (f)
|
2012
|
2013
|
British
|
November
1956
|
Independent4,5
|
|
Ulrik
Hjulmand-Lassen3
(m)
|
2010
|
2014
|
Danish
|
April
1962
|
Not
independent
|
|
Thomas
Paul Koestler (m)
|
2011
|
2013
|
American
|
June
1951
|
Independent
|
|
Anne
Marie Kverneland3
(f)
|
2000
|
2014
|
Danish
|
July
1956
|
Not
independent
|
|
Kurt
Anker Nielsen (m)
|
2000
|
2013
|
Danish
|
August
1945
|
Not
independent2,4
|
|
Søren
Thuesen Pedersen3
(m)
|
2006
|
2014
|
Danish
|
December
1964
|
Not
independent
|
|
Hannu
Ryöppönen (m)
|
2009
|
2013
|
Finnish
|
March
1952
|
Independent4,5
|
|
Stig
Strøbæk3
(m)
|
1998
|
2014
|
Danish
|
January
1964
|
Not
independent
|
| 1. | As designated by NASDAQ OMX Copenhagen in accordance with section 5.4.1 of Recommendations on Corporate Governance. |
| 2. | Member of Management or the Board of Novo A/S or the Novo Nordisk Foundation. |
| 3. | Elected by employees of Novo Nordisk. |
| 4. | Mr Ryöppönen, Mr Nielsen 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 2012
| 54 | GOVERNANCE, LEADERSHIP AND SHARES |
|
|
|
Lars Rebien Sørensen
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. Mr Sørensen was appointed a member of Corporate Management in May 1994, and in December 1994 he 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.
Education: BSc in International Economics (1983) from Copenhagen Business School, Denmark, and MSc in Forestry (1981) from the Royal Veterinary and Agricultural University (now the Faculty of Science of the University of Copenhagen), Denmark.
Date of birth: October 1954.
Jesper Brandgaard
Chief financial officer
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: Chairman of the boards of SimCorp A/S and
NNIT A/S, both in Denmark.
Education:
MBA (1995) and MSc in Economics and Auditing (1990) from Copenhagen Business
School, Denmark.
Date
of birth: October 1963.
Lise Kingo
Chief of staffs
Lise Kingo joined Novo Industry A/S in 1988 and worked over the years to build up the company’s Triple Bottom Line approach. In 1999, Ms Kingo was appointed senior vice president, Stakeholder Relations. In 2002, she was appointed executive vice president and chief of staffs in Novo Nordisk, assuming global responsibility for Corporate Relations. She is adjunct professor at the Medical Faculty, Vrije Universiteit, Amsterdam, the Netherlands.
Other management duties: Chairman of the board of Steno Diabetes Center A/S and chairman of the Danish Council on Corporate Social Responsibility, both in Denmark.
Education: MSc (Hons) in Responsibility and Business Practice (2000) from the University of Bath, UK, BCom in Marketing Economics (1991) from Copenhagen Business School, Denmark, and BA in Religions and Ancient Greek Art (1986) from the University of Aarhus, Denmark.
Date of birth: August 1961.
Kåre Schultz
Chief operating 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: Chairman of the board of Royal Unibrew A/S
and member of the board of LEGO A/S, both in Denmark.
Education: MSc in Economics (1987) from the University
of Copenhagen, Denmark.
Date
of birth: May 1961.
Mads Krogsgaard Thomsen
Chief science officer
Mads Krogsgaard Thomsen
joined Novo Nordisk in 1991. 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 is a former president of the National Academy
of Technical Sciences (ATV), Denmark. Since 2000 he has served as 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.
Education:
DSc (1991), PhD (1989) and DVM (1986) from the Royal Veterinary and Agricultural
University (now the Faculty of Health and Medical Sciences of the University
of Copenhagen), Denmark.
Date of birth: December
1960.
|
New
members of |
||
NOVO NORDISK ANNUAL REPORT 2012
|
|
|
|
|
Consolidated
financial statements
|
||
| Income statement and Statement of comprehensive income | ||
| Balance sheet | ||
| Statement of cash flows | ||
| Statement of changes in equity | ||
| Notes to the Consolidated financial statements | ||
|
|
||
|
Consolidated
social statement (supplementary information)
|
||
| Statement of social performance | ||
| Notes to the Consolidated social statemente | ||
|
|
||
|
Consolidated
environmental statement (supplementary information)
|
||
| Statement of environmental performanc | ||
| Notes to the Consolidated environmental statement | ||
 |
||
|
Shareholders’
meeting in
Copenhagen, March 2012. |
||
| 56 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
Income statement and Statement of comprehensive income for the year ended 31 December
|
DKK
million
|
Note
|
2012
|
2011
|
2010
|
||||
|
|
|
|
|
|
|
|
|
|
| Income statement | ||||||||
| Sales | 2.1, 2.2 | 78,026 | 66,346 | 60,776 | ||||
| Cost of goods sold | 2.2, 2.3 | 13,465 | 12,589 | 11,680 | ||||
|
|
|
|
|
|
|
|
|
|
| Gross profit | 64,561 | 53,757 | 49,096 | |||||
| Sales and distribution costs | 2.2, 2.3 | 21,544 | 19,004 | 18,195 | ||||
| Research and development costs | 2.2, 2.3 | 10,897 | 9,628 | 9,602 | ||||
| Administrative costs | 2.2, 2.3 | 3,312 | 3,245 | 3,065 | ||||
| Licence fees and other operating income, net | 2.2, 5.6 | 666 | 494 | 657 | ||||
|
|
|
|
|
|
|
|
|
|
| Operating profit | 29,474 | 22,374 | 18,891 | |||||
| Financial income | 4.8 | 125 | 514 | 1,452 | ||||
| Financial expenses | 4.8 | 1,788 | 963 | 2,057 | ||||
|
|
|
|
|
|
|
|
|
|
| Profit before income taxes | 27,811 | 21,925 | 18,286 | |||||
| Income taxes | 2.4 | 6,379 | 4,828 | 3,883 | ||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year | 21,432 | 17,097 | 14,403 | |||||
|
|
|
|
|
|
|
|
|
|
| Earnings per share | ||||||||
| Basic earnings per share (DKK) |
4.1
|
39.09 | 30.24 | 24.81 | ||||
| Diluted earnings per share (DKK) |
4.1
|
38.85 | 29.99 | 24.60 | ||||
|
|
|
|
|
|
|
|
|
|
Statement of comprehensive income
| Net profit for the year |
21,432
|
17,097
|
14,403
|
|||||
| Other comprehensive income: | ||||||||
| Items that will not be reclassified subsequently to the Income statement: | ||||||||
| Remeasurements on defined benefit plans |
3.7
|
(281 | ) | – | – | |||
| Items that will be reclassified subsequently to the Income statement, | ||||||||
| when specific conditions are met: | ||||||||
| Exchange rate adjustments of investments in subsidiaries | (172 | ) | (173 | ) | 300 | |||
| Cash fiow hedges, realisation of previously deferred (gains)/losses | 1,182 | 658 | (422 | ) | ||||
| Cash fiow hedges, deferred gains/(losses) incurred during the period | 849 | (1,170 | ) | (643 | ) | |||
| Other items | 35 | (20 | ) | 4 | ||||
| Tax on other comprehensive income, income/(expense) |
2.4
|
(587 | ) | 190 | 346 | |||
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income for the year, net of tax | 1,026 | (515 | ) | (415 | ) | |||
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | 22,458 | 16,582 | 13,988 | |||||
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
57
|
|
|
|
|
DKK
million
|
Note
|
2012
|
2011
|
|||
|
|
|
|
|
|
|
|
| Assets | ||||||
| Intangible assets |
3.1
|
1,495 | 1,489 | |||
| Property, plant and equipment |
3.2
|
21,539 | 20,931 | |||
| Deferred income tax assets |
2.4
|
2,244 | 2,414 | |||
| Other financial assets |
4.7
|
228 | 273 | |||
|
|
|
|
|
|
|
|
| Total non-current assets | 25,506 | 25,107 | ||||
|
|
|
|
|
|
|
|
| Inventories |
3.3
|
9,543 | 9,433 | |||
| Trade receivables |
3.4
|
9,639 | 9,349 | |||
| Tax receivables | 1,240 | 883 | ||||
| Other receivables and prepayments |
3.5
|
2,705 | 2,376 | |||
| Marketable securities |
4.7
|
4,552 | 4,094 | |||
| Derivative financial instruments |
4.4
|
931 | 48 | |||
| Cash at bank and on hand |
4.5
|
11,553 | 13,408 | |||
|
|
|
|
|
|
|
|
| Total current assets | 40,163 | 39,591 | ||||
|
|
|
|
|
|
|
|
| Total assets | 65,669 | 64,698 | ||||
|
|
|
|
|
|
|
|
Equity and liabilities
| Share capital |
4.1
|
560
|
580
|
|||
| Treasury shares |
4.1
|
(17)
|
(24)
|
|||
| Retained earnings |
39,001
|
37,111
|
||||
| Other reserves |
1,088
|
(219)
|
||||
|
|
|
|
|
|
|
|
| Total equity | 40,632 | 37,448 | ||||
|
|
|
|
|
|
|
|
| Loans |
4.2
|
– | 502 | |||
| Deferred income tax liabilities |
2.4
|
732 | 3,206 | |||
| Retirement benefit obligations |
3.7
|
760 | 439 | |||
| Provisions |
3.6
|
1,907 | 2,324 | |||
|
|
|
|
|
|
|
|
| Total non-current liabilities | 3,399 | 6,471 | ||||
|
|
|
|
|
|
|
|
| Current debt |
4.2
|
500 | 351 | |||
| Trade payables |
4.7
|
3,859 | 3,291 | |||
| Tax payables | 593 | 1,171 | ||||
| Other liabilities |
3.8
|
8,982 | 8,534 | |||
| Derivative financial instruments |
4.4
|
48 | 1,492 | |||
| Provisions |
3.6
|
7,656 | 5,940 | |||
|
|
|
|
|
|
|
|
| Total current liabilities | 21,638 | 20,779 | ||||
|
|
|
|
|
|
|
|
| Total liabilities | 25,037 | 27,250 | ||||
|
|
|
|
|
|
|
|
| Total equity and liabilities | 65,669 | 64,698 | ||||
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 58 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
Statement of cash fiows for the year ended 31 December
|
DKK
million
|
Note
|
2012
|
2011
|
2010
|
||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year | 21,432 | 17,097 | 14,403 | |||||
| Adjustment for non-cash items |
5.3
|
11,253 | 9,117 | 8,449 | ||||
| Change in working capital |
4.6
|
274 | 434 | 297 | ||||
| Interest received | 207 | 332 | 218 | |||||
| Interest paid | (61 | ) | (215 | ) | (252 | ) | ||
| Income taxes paid |
2.4
|
(10,891 | ) | (5,391 | ) | (3,436 | ) | |
|
|
|
|
|
|
|
|
|
|
| Net cash generated from operating activities | 22,214 | 21,374 | 19,679 | |||||
|
|
|
|
|
|
|
|
|
|
| Proceeds from the divestment of ZymoGenetics, Inc. | – | – | 1,155 | |||||
| Purchase of intangible assets and other financial assets | (250 | ) | (259 | ) | (513 | ) | ||
| Proceeds from sale of property, plant and equipment | 53 | 70 | 68 | |||||
| Purchase of property, plant and equipment |
3.2
|
(3,372 | ) | (3,073 | ) | (3,376 | ) | |
| Net purchase of marketable securities | (501 | ) | (197 | ) | (2,913 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities | (4,070 | ) | (3,459 | ) | (5,579 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Repayment of loans |
4.2
|
(502 | ) | (507 | ) | – | ||
| Purchase of treasury shares, net |
4.1
|
(11,896 | ) | (10,595 | ) | (8,820 | ) | |
| Dividends paid |
4.1
|
(7,742 | ) | (5,700 | ) | (4,400 | ) | |
|
|
|
|
|
|
|
|
|
|
| Net cash used in financing activities | (20,140 | ) | (16,802 | ) | (13,220 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Net cash generated from activities | (1,996 | ) | 1,113 | 880 | ||||
| Cash and cash equivalents at the beginning of the year |
4.5
|
13,057 | 11,960 | 11,034 | ||||
| Exchange gains/(losses) on cash and cash equivalents | (8 | ) | (16 | ) | 46 | |||
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at the end of the year |
4.5
|
11,053 | 13,057 | 11,960 | ||||
|
|
|
|
|
|
|
|
|
|
| Additional information:1 | ||||||||
| Cash and cash equivalents at the end of the year |
4.5
|
11,053 | 13,057 | 11,960 | ||||
| Marketable securities at the end of the year |
4.7
|
4,552 | 4,094 | 3,926 | ||||
| Undrawn committed credit facilities2 | 4,849 | 4,832 | 4,473 | |||||
|
|
|
|
|
|
|
|
|
|
| Financial resources at the end of the year | 20,454 | 21,983 | 20,359 | |||||
|
|
|
|
|
|
|
|
|
|
| Net cash generated from operating activities | 22,214 | 21,374 | 19,679 | |||||
| Net cash used in investing activities | (4,070 | ) | (3,459 | ) | (5,579 | ) | ||
| Net purchase of marketable securities | 501 | 197 | 2,913 | |||||
|
|
|
|
|
|
|
|
|
|
| Free cash fiow | 18,645 | 18,112 | 17,013 | |||||
|
|
|
|
|
|
|
|
|
|
| 1. | Additional non-IFRS measures. Please refer to p 93 for definitions. |
| 2. | The undrawn committed credit facility is a EUR 650 million (EUR 650 million in 2011 and EUR 600 million in 2010) facility committed by a portfolio of international banks. The facility matures in 2016. |
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
59
|
|
|
|
Statement of changes in equity at 31 December
| Other reserves | ||||||||||||||||
|
|
||||||||||||||||
| DKK million |
Share
capital |
Treasury
shares |
Retained
earnings |
Exchange
rate adjustment |
Cash
flow hedges |
Tax
and
other items |
Total
other reserves |
Total
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 year1 | (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 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other reserves | ||||||||||||||||
|
|
||||||||||||||||
| DKK million |
Share
capital |
Treasury
shares |
Retained
earnings |
Exchange
rate adjustment |
Cash
fiow hedges |
Tax
and
other items |
Total
other reserves |
Total
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 year1 | (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 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Please refer to Statement of comprehensive income p 56.
NOVO NORDISK ANNUAL REPORT 2012
| 60 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
As Novo Nordisk’s business continues to develop, the company remains focused on simplifying and streamlining its integrated reporting. In 2012 Novo Nordisk has restructured the Consolidated financial, social and environmental statements 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 have been 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 refiected 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.
|
Sections in the Consolidated financial statements Section 1
‘Basis of preparation’ 1.1 Summary of significant
accounting policies, p 61 Section 2
‘Results for the year’ 2.1 Sales and sales
rebates, p 63 Section 3
‘Operating assets and liabilities’ 3.1 Intangible assets,
p 69 |
Section 4 ‘Capital
structure and financing items’ Section 5
‘Other disclosures’ 5.1 Share-based payment
schemes, p 85 |
|
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
61
|
|
|
|
Section 1
Basis of preparation of
the Consolidated financial statements
Novo Nordisk presents its Consolidated financial statements on the basis of the latest developments in international financial reporting, and the company strives for early adoption of EU endorsed IFRS accounting standards.
All affiliates in the Novo Nordisk Group follow the same Group accounting policies. This section describes the significant accounting policies and other accounting policies in general, including Management’s key accounting estimates and the new IFRS requirements. 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.
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), as well as in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union.
Furthermore, the annual report has been prepared 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 the revaluation of available-for-sale financial assets such as derivative financial instruments measured at fair value through the income statement, and equity investments and marketable securities measured at fair value through other comprehensive income.
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 relation to the individual notes to the Consolidated financial statements. Considering all the accounting policies applied in the preparation of the Consolidated financial statements, Management regards the following as the most significant accounting policies for the recognition and measurement of reported amounts:
| • | Sales and sales rebates
(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. Our gross sales are subject to various deductions that are composed primarily of rebates and discounts to retail customers, government agencies, wholesalers, health insurance companies and managed healthcare organisations. These deductions represent estimates of the related 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). 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 is obtained (highly probable) in a relevant major market. |
| • | Derivative financial
instruments (note 4.4). 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 earnings 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 present 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 and GBP, Sales will be impacted by exchange rate fluctuations whereas the impact from exchange rate fluctuations on Profit before income taxes depends on the results of the hedging activities. |
| In addition, the following other accounting policies are considered relevant to an understanding of the Consolidated financial statements: | |
| • | Income taxes (note 2.4) |
| • | Intangible assets and Property, plant and equipment including impairment (notes 3.1 and 3.2) |
| • | Inventories (note 3.3) |
| • | Trade receivables and allowances for doubtful trade receivables (note 3.4) |
| • | Provisions for legal disputes (note 3.6). |
Key accounting estimates
The use of reasonable estimates is an essential part of the preparation of consolidated financial statements. Given the uncertainties inherent in our 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 flow 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:
| • | Rebates and sales discounts 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) |
| • | Deferred income tax assets and liabilities (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.
NOVO NORDISK ANNUAL REPORT 2012
| 62 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
1.2 Other accounting policies
Changes in accounting policies and disclosures
Early adoption of new
or amended IFRSs
IAS 19R ‘Employee
benefits’ was revised by IASB in June 2011 with an effective date on
or after 1 January 2013 and endorsed by the EU in June 2012. Novo Nordisk
has early adopted the amendment in 2012 and is thus not utilising the option
to defer the recognition of actuarial gains and losses from defined benefit
post-employment plans, known as the corridor approach, and is instead recognising
all actuarial gains and losses in Other comprehensive income as these occur.
Early adoption also involves immediate recognition of all past service costs,
and replacing interest cost and expected return on plan assets with a net
interest amount that is calculated by applying the discount rate used to discount
to the net defined benefit obligation (asset).
As retrospective application of these changes would have only an immaterial impact on each previous financial year, Novo Nordisk has fully adopted the amendment in 2012 without restating previous years’ comparable amounts and disclosures. Thus, while the adoption has not had an initial impact on the Income statement in 2012, the implementation decreased Other comprehensive income and Equity by DKK 250 million, decreased Deferred income tax liabilities by DKK 31 million and increased Retirement benefit obligation by DKK 281 million.
Please refer to note 3.7 for a detailed description of the new accounting policy for retirement benefit obligations.
Furthermore, Novo Nordisk has early adopted the amendment to IAS 1 ‘Presentation of financial statements’, effective for annual periods beginning on or after 1 July 2012. The amendment requires items of Other comprehensive income, classified by nature, to be grouped into those that will be reclassified subsequently to the Income statement when specific conditions are met and those that will not.
Adoption of new or
amended IFRSs
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 1 January
2012, it has been assessed that the application of the new IFRSs has not had
a material impact on the Consolidated financial statements in 2012 and Novo
Nordisk 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 are the most significant:
| • | IASB has issued IFRS 9 ‘Financial Instruments’, which is applicable for reporting periods starting on or after 1 January 2015. This 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. The new standards and the amendment have not yet been endorsed by the European Union. Novo Nordisk has assessed the impact of the standard and determined that it, in its current wording, will not have any significant impact on the Consolidated financial statements. |
| • | IASB has issued re-exposure drafts on IAS 18 ‘Revenue’ and IAS 17 ‘Leasing’. The revised IAS 18 is expected to have only immaterial impact on the Consolidated financial statements. The change in lease accounting is expected to require capitalisation of the majority of the Group’s lease contracts, which will have some impact on the Group’s assets, liabilities and financial ratios, but no significant impact on net profit. However, the final impact may change depending on the final wording of the standards. |
1.3 Other general accounting policies
Defining materiality
Novo Nordisk’s 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 statements or in the notes.
There are substantial disclosure requirements throughout IFRS. Novo Nordisk 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.
Principles of consolidation
The Consolidated financial
statements incorporate the financial statements of Novo Nordisk A/S and entities
controlled by Novo Nordisk A/S.
Where necessary, adjustments
are made to the financial statements of subsidiaries to bring their accounting
policies into line with Novo Nordisk 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 assets and liabilities,
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’ income statements using average exchange rates, whereas balance sheet items are translated using the exchange rates prevailing 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. |
The above exchange rate adjustments are recognised in Other comprehensive income.
Statement of cash
flows
The Statement of cash flows
is presented in accordance with the indirect method commencing with Net profit
for the year.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
63
|
|
|
|
Section 2
Results for the year
This section comprises notes in relation to the results for the year, including disclosure on operating segments, and provides additional information related to two of Novo Nordisk’s four long-term financial targets: Operating profit margin and Growth in operating profit.
Continued growth in the number of patients and innovative new products drive Novo Nordisk’s growth in sales. Novo Nordisk expects growth in operating profit to be higher than sales growth, thereby increasing operating margin. This is expected to be enabled by gross margin expansion from both product mix and pricing as well as further productivity improvements in the manufacturing areas. For non-production related activities, the operating margin expansion is expected to be supported by a modest development in administrative costs and scale advantages within sales and marketing, whereas continued investment is envisioned for the research and development activities, which are expected to grow at least 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 ‘2012 performance and 2013 outlook’ on p 6 gives a detailed description of the results for the year.
2.1 Sales and sales rebates
Accounting policies
Revenue from goods sold is
recognised when all the following conditions are met:
| • | Novo Nordisk has transferred the significant risks and rewards of ownership of the goods to the buyer. |
| • | Novo Nordisk retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. |
| • | The amount of revenue can be measured reliably. |
| • | It is probable that the economic benefits associated with the transaction will flow to the entity. |
| • | The costs incurred or to be incurred in respect of the transaction 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 reported as a reduction of revenue. 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.
Key accounting estimates
– rebates and sales discounts
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. 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.
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 involves interpretation of relevant regulations that are subject to challenge or change in interpretative guidance by 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.
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. Since they are contractually agreed upon, 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 considers the sales performance of products subject to managed healthcare rebates and other contract discounts, and adjusts the provision periodically to reflect actual experience.
Wholesaler charge-backs relate to contractual arrangements existing between Novo Nordisk and indirect customers, mainly 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 one to three months of the liability being incurred.
In certain non-US countries, Novo Nordisk also provides rebates to governments and other entities mandated by laws or government regulations. Furthermore, Novo Nordisk enters into pay-for-performance arrangements with certain healthcare providers. Under these agreements, Novo Nordisk may be required to make refunds to the healthcare providers if anticipated treatment outcomes do not meet predefined targets. Potential refunds are estimated and recorded as a reduction of revenue at the time the related revenues are recorded.
Provisions for sales deductions are adjusted to actual amounts as rebates and discounts are processed. Please refer to section 3.6 for further information on sales-related provisions.
Gross-to-net sales reconciliation
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
|
Gross
sales
|
103,948
|
84,386
|
75,811
|
|||
|
|
|
|
|
|
|
|
| US Medicaid and Medicare rebates |
(7,519
|
)
|
(5,075
|
)
|
(4,124
|
)
|
| US managed healthcare rebates |
(4,390
|
)
|
(2,551
|
)
|
(2,494
|
)
|
| US wholesaler charge-backs |
(8,196
|
)
|
(5,894
|
)
|
(4,994
|
)
|
| Non-US healthcare plans and | ||||||
| programme rebates |
(901
|
)
|
(695
|
)
|
(543
|
)
|
| Sales returns and discounts |
(4,916
|
)
|
(3,825
|
)
|
(2,880
|
)
|
|
|
|
|
|
|
|
|
|
Total
gross-to-net sales adjustments
|
(25,922
|
)
|
(18,040
|
)
|
(15,035
|
)
|
|
|
|
|
|
|
|
|
| Total net sales |
78,026
|
66,346
|
60,776 | |||
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 64 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
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 on a Group basis 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 fees and other operating income have 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
|
2012
|
2011
|
2010
|
2012
|
2011
|
2010
|
2012
|
2011
|
2010
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
sales
|
Diabetes care | Biopharmaceuticals | Total | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
NovoRapid®
/ NovoLog®
|
15,693
|
12,804
|
11,900
|
|||||||||||||||
|
NovoMix®
/ NovoLog®Mix
|
9,342
|
8,278
|
7,821
|
|||||||||||||||
|
Levemir®
|
9,786
|
7,683
|
6,880
|
|||||||||||||||
|
Total
modern insulins
|
34,821
|
28,765
|
26,601
|
|||||||||||||||
|
Human
insulins
|
11,302
|
10,785
|
11,827
|
|||||||||||||||
|
Victoza®
|
9,495
|
5,991
|
2,317
|
|||||||||||||||
|
Protein-related
products
|
2,511
|
2,309
|
2,214
|
|||||||||||||||
|
Oral
antidiabetic products (OAD)
|
2,758
|
2,575
|
2,751
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total sales
|
60,887 | 50,425 | 45,710 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NovoSeven®
|
8,933 | 8,347 | 8,030 | |||||||||||||||
|
Norditropin®
|
5,698 | 5,047 | 4,803 | |||||||||||||||
|
Hormone
replacement therapy
|
2,163 | 2,054 | 1,892 | |||||||||||||||
|
Other
products
|
345 | 473 | 341 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total sales
|
17,139 | 15,921 | 15,066 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
key figures
|
||||||||||||||||||
|
Total
sales
|
60,887 | 50,425 | 45,710 | 17,139 | 15,921 | 15,066 | 78,026 | 66,346 | 60,776 | |||||||||
|
Change
in DKK (%)
|
20.7% | 10.3% | 21.9% | 7.7% | 5.7% | 11.0% | 17.6% | 9.2% | 19.0% | |||||||||
|
Change
in local currencies (%)
|
14.5% | 12.6% | 15.7% | 2.4% | 7.6% | 5.4% | 11.6% | 11.4% | 13.0% | |||||||||
|
Cost
of goods sold
|
11,435 | 10,762 | 10,131 | 2,030 | 1,827 | 1,549 | 13,465 | 12,589 | 11,680 | |||||||||
|
Sales
and distribution costs
|
18,894 | 16,476 | 14,815 | 2,650 | 2,528 | 3,380 | 21,544 | 19,004 | 18,195 | |||||||||
|
Research
and development costs
|
7,322 | 6,402 | 6,744 | 3,575 | 3,226 | 2,858 | 10,897 | 9,628 | 9,602 | |||||||||
|
Administrative
costs
|
2,604 | 2,485 | 2,260 | 708 | 760 | 805 | 3,312 | 3,245 | 3,065 | |||||||||
|
Licence
fees and other operating
|
||||||||||||||||||
|
income,
net
|
464 | 285 | 342 | 202 | 209 | 315 | 666 | 494 | 657 | |||||||||
|
Operating
profit
|
21,096 | 14,585 | 12,102 | 8,378 | 7,789 | 6,789 | 29,474 | 22,374 | 18,891 | |||||||||
|
Depreciation,
amortisation and
|
||||||||||||||||||
|
impairment
losses included in costs
|
2,167 | 2,051 | 1,887 | 526 | 686 | 580 | 2,693 | 2,737 | 2,467 | |||||||||
|
Additions
to Intangible assets
|
||||||||||||||||||
|
and
Property, plant and equipment
|
2,800 | 2,654 | 3,068 | 770 | 678 | 795 | 3,570 | 3,332 | 3,863 | |||||||||
|
Assets
allocated to business segments
|
36,030 | 34,853 | 34,947 | 9,119 | 8,998 | 7,906 | 45,149 | 43,851 | 42,853 | |||||||||
|
Assets
not allocated to business
|
||||||||||||||||||
|
segments1
|
20,520 | 20,847 | 18,549 | |||||||||||||||
|
Total
assets
|
65,669 | 64,698 | 61,402 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | The part of total assets that has not been allocated to either of the two business segments includes Cash at bank and on hand, Marketable securities, Derivative financial instruments and tax assets. |
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
65
|
|
|
|
2.2 Segment information (continued)
Geographical segments
Novo Nordisk operates in five geographical regions:
| • | North America: the US and Canada |
| • | Europe: the EU, EFTA, Albania, Bosnia-Hercegovina, Croatia, 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, allowances 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 in relation to Novo Nordisk’s activities in terms of geographical size and the operational business segments. Less than 1% of the total sales is realised in Denmark. Sales to external customers attributed to the US are collectively the most material to the company. 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.
Geographical segments
|
DKK
million
|
2012
|
2011
|
2010
|
2012
|
2011
|
2010
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
Europe | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
| Sales by business segment: | ||||||||||||
|
NovoRapid®
/ NovoLog®
|
9,033
|
6,934
|
6,501
|
3,707
|
3,464
|
3,258
|
||||||
|
NovoMix®
/ NovoLog®Mix
|
2,488
|
2,088
|
2,099
|
2,544
|
2,623
|
2,562
|
||||||
|
Levemir®
|
5,290
|
3,711
|
3,229
|
2,833
|
2,577
|
2,410
|
||||||
|
Modern
insulins (insulin analogues)
|
16,811
|
12,733
|
11,829
|
9,084
|
8,664
|
8,230
|
||||||
|
Human
insulins
|
1,959
|
1,762
|
2,156
|
2,642
|
3,032
|
3,532
|
||||||
|
Victoza®
|
5,930
|
3,716
|
1,457
|
2,427
|
1,620
|
753
|
||||||
|
Other
diabetes care
|
1,998
|
1,705
|
1,646
|
965
|
1,210
|
1,536
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
26,698
|
19,916
|
17,088
|
15,118
|
14,526
|
14,051
|
||||||
|
NovoSeven®
|
4,397
|
3,951
|
4,043
|
2,206
|
2,310
|
2,180
|
||||||
|
Norditropin®
|
1,721
|
1,394
|
1,320
|
1,741
|
1,705
|
1,823
|
||||||
|
Other
biopharmaceuticals
|
1,404
|
1,325
|
1,158
|
642
|
627
|
610
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
7,522
|
6,670
|
6,521
|
4,589
|
4,642
|
4,613
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales by business and geographical segment | 34,220 | 26,586 | 23,609 | 19,707 | 19,168 | 18,664 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying sales growth in local currencies1 | 19.2% | 17.9% | 22.4% | 2.0% | 2.4% | 4.6% | ||||||
| Currency effect (local currency impact) | 9.5% | (5.3% | ) | 6.8% | 0.8% | 0.3% | 1.8% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales growth as reported | 28.7% | 12.6% | 29.2% | 2.8% | 2.7% | 6.4% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment | 1,500 | 1,329 | 987 | 16,200 | 15,681 | 15,669 | ||||||
| Trade receivables | 2,278 | 2,081 | 1,689 | 3,688 | 3,652 | 3,437 | ||||||
| Allowance for doubtful trade receivables | (18 | ) | (22 | ) | (19 | ) | (239 | ) | (333 | ) | (200 | ) |
| Total assets | 5,867 | 5,465 | 3,680 | 47,663 | 47,202 | 46,654 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 66 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
2.2 Segment information (continued)
Geographical segments
|
DKK
million
|
2012
|
2011
|
2010
|
2012
|
2011
|
2010
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| International Operations | Japan & Korea | |||||||||||
|
|
|
|
|
|
|
|||||||
| Sales by business segment: | ||||||||||||
|
NovoRapid®
/ NovoLog®
|
1,408
|
1,100
|
965
|
1,175
|
1,057
|
987
|
||||||
|
NovoMix®
/ NovoLog®Mix
|
1,708
|
1,482
|
1,377
|
1,028
|
970
|
913
|
||||||
|
Levemir®
|
1,106
|
942
|
843
|
386
|
363
|
349
|
||||||
|
Modern
insulins (insulin analogues)
|
4,222
|
3,524
|
3,185
|
2,589
|
2,390
|
2,249
|
||||||
|
Human
insulins
|
3,073
|
2,581
|
2,588
|
768
|
960
|
1,101
|
||||||
|
Victoza®
|
613
|
322
|
37
|
455
|
327
|
70
|
||||||
|
Other
diabetes care
|
632
|
583
|
553
|
493
|
430
|
394
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
8,540
|
7,010
|
6,363
|
4,305
|
4,107
|
3,814
|
||||||
|
NovoSeven®
|
1,526
|
1,485
|
1,245
|
646
|
482
|
461
|
||||||
|
Norditropin®
|
780
|
651
|
530
|
1,442
|
1,285
|
1,120
|
||||||
|
Other
biopharmaceuticals
|
234
|
221
|
197
|
224
|
349
|
265
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
2,540
|
2,357
|
1,972
|
2,312
|
2,116
|
1,846
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales by business and geographical segment | 11,080 | 9,367 | 8,335 | 6,617 | 6,223 | 5,660 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying sales growth in local currencies1 | 16.2% | 17.1% | 22.3% | (1.5% | ) | 5.1% | 3.3% | |||||
| Currency effect (local currency impact) | 2.1% | (4.7% | ) | (0.4% | ) | 7.8% | 4.8% | 12.5% | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales growth as reported | 18.3% | 12.4% | 21.9% | 6.3% | 9.9% | 15.8% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment | 1,508 | 1,672 | 1,929 | 174 | 207 | 213 | ||||||
| Trade receivables | 2,177 | 2,052 | 1,995 | 335 | 377 | 446 | ||||||
| Allowance for doubtful trade receivables | (710 | ) | (535 | ) | (408 | ) | (3 | ) | (2 | ) | 0 | |
| Total assets | 6,660 | 6,419 | 6,327 | 989 | 1,388 | 1,158 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DKK
million
|
2012
|
2011
|
2010
|
2012
|
2011
|
2010
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Region China | Total | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales by business segment: | ||||||||||||
|
NovoRapid®
/ NovoLog®
|
370
|
249
|
189
|
15,693
|
12,804
|
11,900
|
||||||
|
NovoMix®
/ NovoLog®Mix
|
1,574
|
1,115
|
870
|
9,342
|
8,278
|
7,821
|
||||||
|
Levemir®
|
171
|
90
|
49
|
9,786
|
7,683
|
6,880
|
||||||
|
Modern
insulins (insulin analogues)
|
2,115
|
1,454
|
1,108
|
34,821
|
28,765
|
26,601
|
||||||
|
Human
insulins
|
2,860
|
2,450
|
2,450
|
11,302
|
10,785
|
11,827
|
||||||
|
Victoza®
|
70
|
6
|
0
|
9,495
|
5,991
|
2,317
|
||||||
|
Other
diabetes care
|
1,181
|
956
|
836
|
5,269
|
4,884
|
4,965
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
6,226
|
4,866
|
4,394
|
60,887
|
50,425
|
45,710
|
||||||
|
NovoSeven®
|
158
|
119
|
101
|
8,933
|
8,347
|
8,030
|
||||||
|
Norditropin®
|
14
|
12
|
10
|
5,698
|
5,047
|
4,803
|
||||||
|
Other
biopharmaceuticals
|
4
|
5
|
3
|
2,508
|
2,527
|
2,233
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
176
|
136
|
114
|
17,139
|
15,921
|
15,066
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales by business and geographical segment | 6,402 | 5,002 | 4,508 | 78,026 | 66,346 | 60,776 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying sales growth in local currencies1 | 16.3% | 11.7% | 19.9% | 11.6% | 11.4% | 13.0% | ||||||
| Currency effect (local currency impact) | 11.7% | (0.7% | ) | 7.6% | 6.0% | (2.2% | ) | 6.0% | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales growth as reported | 28.0% | 11.0% | 27.5% | 17.6% | % | 9.2% | 19.0% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment | 2,157 | 2,042 | 1,709 | 21,539 | 20,931 | 20,507 | ||||||
| Trade receivables | 1,161 | 1,187 | 933 | 9,639 | 9,349 | 8,500 | ||||||
| Allowance for doubtful trade receivables | (54 | ) | 0 | 0 | (1,024 | ) | (892 | ) | (627 | ) | ||
| Total assets | 4,490 | 4,224 | 3,583 | 65,669 | 64,698 | 61,402 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Additional non-IFRS
measure. Please refer to p 93 for definitions.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
67
|
|
|
|
2.3 Employee costs
Accounting policies
Wages, salaries, social security contributions, annual leave and sick leave, bonuses and non-monetary benefits are recognised in the year in which the associated services are rendered by employees of Novo Nordisk. Where Novo Nordisk provides long-term employee benefits, the costs are accrued to match the rendering of the services by the employees concerned.
Employee costs
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Wages and salaries |
17,301
|
16,127
|
14,520
|
|||
| Share-based payment costs (note 5.1) |
308
|
319
|
463
|
|||
| Pensions – defined contribution plans |
1,302
|
1,155
|
1,052
|
|||
| Pensions – retirement benefit | ||||||
| obligations (note 3.7) |
150
|
(2
|
)
|
210
|
||
| Other social security contributions |
1,358
|
1,189
|
1,067
|
|||
| Other employee costs |
1,779
|
1,491
|
1,510
|
|||
|
|
|
|
|
|
|
|
| Total employee costs for the year |
22,198
|
20,279
|
18,822
|
|||
| Employee costs included | ||||||
| in property, plant and equipment1 |
(533
|
)
|
(496
|
)
|
(559
|
)
|
| Change in employee costs included | ||||||
| in inventories |
(70
|
)
|
(37
|
)
|
76
|
|
|
|
|
|
|
|
|
|
| Total employee costs expensed | ||||||
| in the Income statement | 21,595 | 19,746 | 18,339 | |||
|
|
|
|
|
|
|
|
| Included in the Income statement: | ||||||
| Cost of goods sold | 4,627 | 4,302 | 4,006 | |||
| Sales and distribution costs | 8,784 | 7,961 | 7,240 | |||
| Research and development costs | 4,298 | 3,980 | 3,697 | |||
| Administrative costs | 2,205 | 1,993 | 2,059 | |||
| Licence fees and other operating | ||||||
| income, net | 1,681 | 1,510 | 1,337 | |||
|
|
|
|
|
|
|
|
| Total employee costs | 21,595 | 19,746 | 18,339 | |||
|
|
|
|
|
|
|
| 1. | This reflects annual gross employee costs included in property, plant and equipment, which subsequently will be included in depreciation of tangible fixed assets. |
| Average number of full-time employees | 33,061 | 31,499 | 29,423 | |||
| Year-end number of full-time employees | 34,286 | 32,136 | 30,014 | |||
|
|
|
|
|
|
|
Remuneration to Executive Management and Board of Directors
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Salary and cash based incentive |
37
|
35
|
32
|
|||
| Pension |
9
|
9
|
8
|
|||
| Other benefits |
1
|
1
|
1
|
|||
|
|
|
|
|
|
|
|
| Executive Management in total1 |
47
|
45
|
41
|
|||
|
|
|
|
|
|
|
|
| Fee to Board of Directors2 |
9
|
9
|
7
|
|||
|
|
|
|
|
|
|
| 1. | Excluding share-based payments, as these are allocated in the joint pool between Executive Management and other members of the Senior Management Board. Please refer to note 5.1 and ’Remuneration’ pp 49 – 51, for further information on remuneration to the Board of Directors, Executive Management and other members of Senior Management Board. |
| 2. | Excluding social security taxes paid amounting to less than DKK 1 million (less than DKK 1 million in 2011). |
2.4 Income and deferred income taxes
Income taxes
Accounting policies
The tax expense for the period comprises current and deferred tax and interest on tax cases ongoing or settled during the year, including adjustments to previous years. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income.
Income taxes expensed
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Current tax on profit for the year |
6,001
|
4,534
|
3,477
|
|||
| Deferred tax on profit for the year |
645
|
257
|
495
|
|||
|
|
|
|
|
|
|
|
| Tax on profit for the year |
6,646
|
4,791
|
3,972
|
|||
| Adjustments related to previous years – | ||||||
| current tax |
4,042
|
277
|
504
|
|||
| Adjustments related to previous years – | ||||||
| deferred tax |
(4,309
|
)
|
(240
|
)
|
(593
|
)
|
|
|
|
|
|
|
|
|
| Income taxes in the | ||||||
| Income statement |
6,379
|
4,828
|
3,883
|
|||
|
|
|
|
|
|
|
|
| Computation of effective tax rate: | ||||||
| Statutory corporate income tax rate | ||||||
| in Denmark | 25.0 | % | 25.0 | % | 25.0 | % |
| Deviation in foreign subsidiaries’ | ||||||
| tax rates compared with the Danish | ||||||
| tax rate (net) | (2.1 | %) | (3.0 | %) | (2.5 | %) |
| Non-taxable income less non-tax- | ||||||
| deductible expenses (net) | 0.1 | % | (0.2 | %) | (1.2 | %) |
| Other | (0.1 | %) | 0.2 | % | (0.1 | %) |
|
|
|
|
|
|
|
|
| Effective tax rate | 22.9 | % | 22.0 | % | 21.2 | % |
|
|
|
|
|
|
|
|
| Tax on other comprehensive income | ||||||
| for the year, (income)/expense | 587 | (190 | ) | (346 | ) | |
|
|
|
|
|
|
|
Tax on other comprehensive income for the year relates to tax on deferred (gains)/losses on cash flow hedges and internal profit. In addition DKK 12 million has been recognised as current tax in other comprehensive income in 2012.
Income taxes paid
| Income taxes paid in Denmark |
7,895
|
2,825
|
1,826
|
|||
| Income taxes paid outside Denmark |
2,996
|
2,566
|
1,610
|
|||
|
|
|
|
|
|
||
| Total income taxes paid | 10,891 |
5,391
|
3,436
|
|||
|
|
|
|
|
|
|
|
The income taxes of DKK 7,895 million paid in Denmark in 2012 include adjustments arising from tax disputes primarily related to transfer pricing.
NOVO NORDISK ANNUAL REPORT 2012
| 68 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
2.4 Income and deferred income taxes (continued)
Deferred income taxes
Accounting policies
Deferred income taxes arise from temporary differences between the accounting and taxable values of the individual consolidated companies and from realisable tax-loss carry-forwards using the liability method. The tax value of tax-loss carry-forwards is included in deferred tax assets to the extent that the tax losses and other tax assets are expected to be utilised in future taxable income. The deferred income taxes are measured according to current tax rules and at the tax rates expected to be in force on elimination of the temporary differences. Unremitted earnings are generally retained by subsidiaries for reinvestment, hence no provision is made for income taxes that would be payable upon the distribution of such earnings unless a concrete distribution of earnings is planned.
Key accounting estimate – deferred income tax assets and liabilities
Novo Nordisk is subject to income taxes around the world. Significant judgement is required in determining the worldwide accrual for income taxes, deferred income tax assets and liabilities, and provision for uncertain tax positions. Novo Nordisk recognises deferred income tax assets if it is probable that sufficient taxable income will be available in the future against which the temporary differences and unused tax losses can be utilised. Management has considered future taxable income in assessing whether deferred income tax assets should be recognised.
Development in deferred income tax assets and liabilities
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| At the beginning of the year |
(792
|
)
|
(1,018
|
)
|
| Reclassification from Other liabilities (note 3.8) |
(739
|
)
|
–
|
|
| Deferred tax on profit for the year |
(645
|
)
|
(257
|
)
|
| Adjustment relating to previous years |
4,309
|
240
|
||
| Deferred tax on items recognised in Other comprehensive income |
(575
|
)
|
190
|
|
| Exchange rate adjustments |
(46
|
)
|
53
|
|
|
|
|
|
|
|
| Total deferred tax assets/(liabilities), net |
1,512
|
(792
|
)
|
|
|
|
|
|
|
|
Property,
|
Tax-loss
|
Offset
|
||||||||||||
|
plant
and
|
Intangible
|
carry-
|
within
|
|||||||||||
| DKK million |
equipment
|
assets
|
Inventories
|
forward
|
Other
|
countries
|
Total
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||||||||
| Net deferred tax asset/(liability) at 1 January | (1,060 | ) |
244
|
1,599
|
87
|
(1,662
|
) |
–
|
(792
|
) | ||||
| Reclassification from Other liabilities |
(739
|
) |
(739
|
) | ||||||||||
| Income/(charge) to the Income statement | 66 |
(106
|
) |
(185
|
) |
(17
|
) |
3,906
|
3,664
|
|||||
| Income/(charge) to Other comprehensive income |
(78
|
) |
(497
|
) |
(575
|
) | ||||||||
| Exchange rate adjustment | (3 | ) |
(5
|
) |
–
|
(4
|
) |
(34
|
) |
(46
|
) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net deferred tax asset/(liability) at 31 December | (997 | ) |
133
|
1,336
|
66
|
974
|
–
|
1,512
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as follows: | ||||||||||||||
| Deferred tax asset at 31 December | 176 |
436
|
2,560
|
66
|
1,421
|
(2,415
|
) |
2,244
|
||||||
| Deferred tax liability at 31 December | (1,173 | ) |
(303
|
) |
(1,224
|
) |
–
|
(447
|
) |
2,415
|
(732
|
) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2011 | ||||||||||||||
| Net deferred tax asset/(liability) at 1 January | (1,279 | ) |
545
|
1,431
|
113
|
(1,828
|
) |
–
|
(1,018
|
) | ||||
| Income/(charge) to the Income statement | 227 |
(316
|
) |
127
|
(21
|
) |
(34
|
) |
(17
|
) | ||||
| Income/(charge) to Other comprehensive income |
41
|
149
|
190
|
|||||||||||
| Exchange rate adjustment | (8 | ) |
15
|
–
|
(5
|
) |
51
|
53
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net deferred tax asset/(liability) at 31 December | (1,060 | ) |
244
|
1,599
|
87
|
(1,662
|
) |
–
|
(792
|
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as follows: | ||||||||||||||
| Deferred tax asset at 31 December | 173 |
550
|
2,880
|
87
|
980
|
(2,256
|
) |
2,414
|
||||||
| Deferred tax liability at 31 December | (1,233 | ) |
(306
|
) |
(1,281
|
) |
–
|
(2,642
|
) |
2,256
|
(3,206
|
) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Further to the above, the tax value of tax-loss carry-forward of DKK 208 million (DKK 221 in 2011) has not been recognised in the balance sheet due to the likelihood that the tax losses will not be realised in the future. Of the unrecognised tax-loss carry-forward, DKK 3 million expires within one year, DKK 11 million between two to five years and DKK 194 million after more than five years.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
69
|
|
|
|
Section 3
Operating assets and liabilities
This section specifies the operating assets that form the basis for the activities of Novo Nordisk, and related liabilities. These net assets impact Novo Nordisk’s long-term target for ‘Operating profit after tax to net operating assets (OPAT/NOA)’.
Novo Nordisk operates with a relatively high OPAT/NOA due to a low level of acquired intangible assets and a stable operating asset base despite significant business growth. This is driven by Novo Nordisk’s organic growth strategy with limited acquisition of rights or businesses, and reflects the fact that, in line with industry practice, Novo Nordisk does not capitalise internal development costs until regulatory approval is highly probable. The overall approach to managing operating assets is to retain assets for research, development and production activities under the company’s own control, and generally to lease non-core assets related to administration and distribution. Furthermore, to maintain high quality in the company’s products and the capability at all times to deliver products to customers, Novo Nordisk ensures that the total production capacity and inventory levels reflect this priority.
3.1 Intangible assets
Accounting policies
Patents and licences, including acquired patents and licences for in-process research and development projects, are carried at historical cost less accumulated amortisation and any impairment loss. Amortisation is calculated using the straight-line method to allocate the cost of patents and licences over their estimated useful lives. Estimated useful life is the shorter of the legal duration and the economic useful life. The amortisation of patents and licences begins, at the earliest, on production of pre-launch inventory or after regulatory approval has been obtained.
Internal development of computer software and other development costs related to major IT projects for internal use that are directly attributable to the design and testing of identifiable and unique software products controlled by Novo Nordisk are recognised as intangible assets if the recognition criteria are met. The computer software has to be a significant business system and the expenditure must lead to the creation of a durable asset. Amortisation is calculated using the straight-line method over the estimated useful life of 3 –10 years. The amortisation commences when the asset is available for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by Management.
Impairment of assets
Intangible assets with an indefinite useful life and intangible assets not yet available for use are not subject to amortisation and are tested annually for impairment irrespective of whether there is any indication that they may be impaired.
Assets that are subject to amortisation, such as intangible assets in use or with definite useful life, and other non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Factors considered material that could trigger an impairment test include the following:
| • | Development of a competing drug |
| • | Changes in the legal framework covering patents, rights or licences |
| • | Advances in medicine and/or technology that affect the medical treatments |
| • | Lower-than-predicted sales |
| • | Adverse impact on reputation and/or brand names |
| • | Changes in the economic lives of similar assets |
| • | Relationship with other intangible assets or property, plant and equipment |
| • | Changes or anticipated changes in participation rates or reimbursement policies. |
If the carrying amount of intangible assets exceeds the recoverable amount based upon the existence of one or more of the above indicators of impairment, any impairment is measured based on discounted projected cash flows. Impairments are reviewed at each reporting date for possible reversal.
Intangible assets
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Cost at the beginning of the year |
2,538
|
2,277
|
||
| Additions during the year |
198
|
259
|
||
| Disposals during the year |
(18
|
)
|
(1
|
)
|
| Effect of exchange rate adjustment |
(6
|
)
|
3
|
|
|
|
|
|
|
|
|
Cost
at the end of the year
|
2,712
|
2,538
|
||
|
|
|
|
|
|
| Amortisation and impairment losses | ||||
| at the beginning of the year |
1,049
|
819
|
||
| Amortisation for the year |
160
|
107
|
||
| Impairment losses for the year |
32
|
125
|
||
| Amortisation and impairment losses reversed | ||||
| on disposals during the year |
(18
|
)
|
(1
|
)
|
| Effect of exchange rate adjustment |
(6
|
)
|
(1
|
)
|
|
|
|
|
|
|
| Amortisation and impairment losses | ||||
| at the end of the year |
1,217
|
1,049
|
||
|
|
|
|
|
|
| Carrying amount at the end of the year |
1,495
|
1,489
|
||
|
|
|
|
|
|
| Specified as: | ||||
| Patents and licenses |
762
|
696
|
||
| Internally developed software |
532
|
518
|
||
| Other intangible assets |
201
|
275
|
||
|
|
|
|
|
|
| Total |
1,495
|
1,489
|
||
|
|
|
|
|
Hereof intangible assets not yet in use amount to DKK 669 million (DKK 980 million in 2011), primarily patents and licences in relation to development projects.
In 2012, an impairment loss of DKK 32 million (DKK 125 million in 2011) related to patents has been recognised due to discontinuation of development projects. Impairment tests in 2012 and 2011 of assets not yet in use were based upon Management’s projections and anticipated net present value of future cash flows from cash-generating units. Management has used a pre-tax discount rate (WACC) of 8% based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values used are based on the expected life of products, forecasted life cycle and cash flow over that period, and the useful life of the underlying assets.
Amortisation and impairment losses
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Cost of goods sold |
81
|
47
|
42
|
|||
| Sales and distribution costs |
50
|
35
|
13
|
|||
| Research and development costs |
47
|
139
|
19
|
|||
| Licence fees and other operating | ||||||
| income, net |
14
|
11
|
6
|
|||
|
|
|
|
|
|
|
|
| Total amortisation and | ||||||
| impairment losses |
192
|
232
|
80
|
|||
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 70 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
3.2 Property, plant and equipment
Accounting policies
Property, plant and equipment is measured at historical cost less accu mulated depreciation and any impairment loss. The cost of self-constructed assets includes costs directly attributable to the construction of the assets. Subsequent cost is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Novo Nordisk and the cost of the item can be measured reliably. In general, constructions of major investments are self-financed and thus no material interest on loans is capitalised as part of the cost. Depreciation is provided under the straight-line method over the estimated useful lives of the assets as follows:
| • | Buildings: 12 – 50 years |
| • | Plant and machinery: 5 –16 years |
| • | Other equipment: 3 –10 years |
| • | Land: not depreciated. |
The depreciation commences when the asset is available for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by Management.
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying amount is higher than its estimated recoverable amount (please refer to note 3.1 for a description of impairment of assets). Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Income statement.
| Property, plant and equipment |
Payments
on
|
|||||||||
|
account
and
|
||||||||||
|
assets
in
|
||||||||||
|
Land
and
|
Plant
and
|
Other
|
course
of
|
|||||||
| DKK million |
buildings
|
machinery
|
equipment
|
construction
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||||
| Cost at the beginning of the year |
14,600
|
17,845
|
3,080
|
4,815
|
40,340
|
|||||
| Additions during the year |
171
|
136
|
220
|
2,845
|
3,372
|
|||||
| Disposals during the year |
(287
|
) |
(350
|
) |
(111
|
) |
–
|
(748
|
) | |
| Transfer from/(to) other items |
1,020
|
553
|
192
|
(1,765
|
) |
–
|
||||
| Effect of exchange rate adjustment |
(159
|
) |
(162
|
) |
(22
|
) |
(17
|
) |
(360
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year |
15,345
|
18,022
|
3,359
|
5,878
|
42,604
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the beginning of the year |
5,525
|
11,888
|
1,996
|
–
|
19,409
|
|||||
| Depreciation for the year |
655
|
1,445
|
313
|
–
|
2,413
|
|||||
| Impairment losses for the year |
18
|
68
|
2
|
–
|
88
|
|||||
| Depreciation and impairment losses reversed on disposals during the year |
(263
|
) |
(315
|
) |
(91
|
) |
–
|
(669
|
) | |
| Effect of exchange rate adjustment |
(54
|
) |
(111
|
) |
(11
|
) |
–
|
(176
|
) | |
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the end of the year |
5,881
|
12,975
|
2,209
|
–
|
21,065
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year |
9,464
|
5,047
|
1,150
|
5,878
|
21,539
|
|||||
|
|
|
|
|
|
|
|
|
|
|
| 2011 | ||||||||||
| Cost at the beginning of the year |
13,598
|
17,243
|
2,861
|
4,516
|
38,218
|
|||||
| Additions during the year |
312
|
262
|
293
|
2,206
|
3,073
|
|||||
| Disposals during the year |
(228
|
) |
(522
|
) |
(167
|
) |
–
|
(917
|
) | |
| Transfer from/(to) other items |
982
|
937
|
85
|
(2,004
|
) |
–
|
||||
| Effect of exchange rate adjustment |
(64
|
) |
(75
|
) |
8
|
97
|
(34
|
) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year |
14,600
|
17,845
|
3,080
|
4,815
|
40,340
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the beginning of the year |
5,048
|
10,806
|
1,857
|
–
|
17,711
|
|||||
| Depreciation for the year |
623
|
1,471
|
289
|
–
|
2,383
|
|||||
| Impairment losses for the year |
29
|
93
|
–
|
–
|
122
|
|||||
| Depreciation and impairment losses reversed on disposals during the year |
(165
|
) |
(462
|
) |
(157
|
) |
–
|
(784
|
) | |
| Effect of exchange rate adjustment |
(10
|
) |
(20
|
) |
7
|
–
|
(23
|
) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the end of the year |
5,525
|
11,888
|
1,996
|
–
|
19,409
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year |
9,075
|
5,957
|
1,084
|
4,815
|
20,931
|
|||||
|
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
71
|
|
|
|
3.2 Property, plant and equipment (continued)
Depreciation and impairment
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Cost of goods sold |
1,909
|
1,833
|
1,790
|
|||
| Sales and distribution costs |
46
|
60
|
47
|
|||
| Research and development costs |
416
|
494
|
441
|
|||
| Administrative costs |
53
|
58
|
56
|
|||
| Licence fees and other operating | ||||||
| income, net |
77
|
60
|
53
|
|||
|
|
|
|
|
|
|
|
| Total depreciation and | ||||||
| impairment losses |
2,501
|
2,505
|
2,387
|
|||
|
|
|
|
|
|
|
3.3 Inventories
Accounting policies
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out method. Cost comprises direct production costs such as raw materials, consumables and labour as well as indirect production costs (IPC). Production costs for work in progress and finished goods include IPC such as employee costs, depreciation, maintenance etc.
If the expected sales prices less completion costs to execute sales (net realisable value) are lower than the carrying amount, a write-down is recognised for the amount by which the carrying amount exceeds its net realisable value.
Inventory manufactured prior to regulatory approval is capitalised as an asset but provided for until there is a high probability of regulatory approval of the product. Before that point, a provision is made against the carrying amount of inventory to its recoverable amount and recorded as R&D costs. At the point when a high probability of regulatory approval is obtained, the provision recorded is reversed, up to no more than the original cost.
Key accounting estimate – Indirect production costs
IPC are measured using a standard cost method, which is reviewed regularly to ensure relevant measures of utilisation, production lead time and other relevant factors. Changes in the parameters for calculation of IPC could have an impact on the gross margin and the overall valuation of inventories.
Inventories
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Raw materials |
1,512
|
1,432
|
||
| Work in progress |
4,910
|
5,035
|
||
| Finished goods |
3,985
|
3,781
|
||
|
|
|
|
|
|
| Total inventories (gross) |
10,407
|
10,248
|
||
| Inventory write-downs at year-end |
864
|
815
|
||
|
|
|
|
|
|
| Total inventories (net) |
9,543
|
9,433
|
||
|
|
|
|
|
|
| Indirect production costs included in work | ||||
| in progress and finished goods (net) |
4,894
|
5,125
|
||
| Share of total inventories (net) |
51%
|
54%
|
||
|
|
|
|
|
|
| Movements in the inventory | ||||
| write-downs | ||||
| Inventory write-downs at the beginning of the year |
815
|
1,301
|
||
| Inventory write-downs during the year |
845
|
303
|
||
| Utilisation of inventory write-downs |
(532
|
)
|
(500
|
)
|
| Reversal of inventory write-downs |
(264
|
)
|
(289
|
)
|
|
|
|
|
|
|
| Inventory write-downs at the end of the year |
864
|
815
|
||
|
|
|
|
|
3.4 Trade receivables
Accounting policies
Trade receivables are, if collection is expected within one year (or in the normal operating cycle of the business if longer), classified as Current assets. If not, they are presented as Non-current assets.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowances for doubtful trade receivables.
The allowances are deducted from the carrying amount of Trade receivables and the amount of the loss is recognised in the Income statement under Sales and distribution costs. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against Sales and distribution costs in the income statement.
Key accounting estimate
–
Allowance for doubtful
trade receivables
Novo Nordisk maintains
allowances for doubtful trade receivables in anticipation of estimated losses
resulting from the subsequent inability of customers to make required payments.
If the financial circumstances of customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances
could be required in future periods. When evaluating the adequacy of the allowance
for doubtful trade receivables, Management analyses trade receivables and
examines historical bad debt, customer concentrations, customer creditworthiness,
current economic trends and changes in customer payment terms.
Please refer to note 4.3
for a general description of credit risk.
As a result of the generally troubled economic climate in Europe and the Eurozone countries, Novo Nordisk has increased its focus on the development in the outstanding trade receivables from this region. Payment history as well as current economic conditions and indicators are taken into account in the valuation of trade receivables.
Furthermore, as a result of the significant increase in sales to countries within Region International Operations, and the fact that many of these countries have low credit ratings, the relative impact of Region International Operations on the allowance for doubtful trade receivables is increasing. Hence, Novo Nordisk continues to monitor the credit exposure related to this region.
Please refer to note 2.2 for a geographical split of trade receivables and allowances for doubtful trade receivables.
NOVO NORDISK ANNUAL REPORT 2012
| 72 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
3.4 Trade receivables (continued)
Trade receivables
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Trade receivables (gross) |
10,663
|
10,241
|
||
| Allowances at the end of the year |
1,024
|
892
|
||
|
|
|
|
|
|
| Trade receivables (net) |
9,639
|
9,349
|
||
|
|
|
|
|
|
| Trade receivables (net) are equal to an average | ||||
| credit period of 45 days (51 days in 2011). | ||||
| Age analysis of trade receivables | ||||
| Non-impaired trade receivables | ||||
| – Not yet due |
8,950
|
8,503
|
||
| – Overdue by between 1 and 179 days |
629
|
712
|
||
| – Overdue by between 180 and 359 days |
60
|
134
|
||
| – Overdue by more than 360 days |
0
|
0
|
||
|
|
|
|
|
|
| Trade receivables with credit risk exposure |
9,639
|
9,349
|
||
| Impaired trade receivables |
1,024
|
892
|
||
|
|
|
|
|
|
| Trade receivables (gross) |
10,663
|
10,241
|
||
|
|
|
|
|
|
| Movement in allowances for | ||||
| doubtful trade receivables | ||||
| Carrying amount at the beginning of the year |
892
|
627
|
||
| Confirmed losses |
(35
|
) |
(66
|
) |
| Reversal of allowances for confirmed losses |
(13
|
) |
(18
|
) |
| Allowances for possible losses during the year |
189
|
361
|
||
| Effect of exchange rate adjustment |
(9
|
) |
(12
|
) |
|
|
|
|
|
|
| Allowances at the end of the year |
1,024
|
892
|
||
|
|
|
|
|
3.5 Other receivables and prepayments
Accounting policies
Other receivables and prepayments are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Other receivables comprise miscellaneous duties and work in progress for third parties etc. Prepayments are payments made to ongoing research and development activities and concerning subsequent financial years etc.
Other receivables and prepayments
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Prepayments |
1,033
|
935
|
||
| Interest receivable |
87
|
113
|
||
| Amounts owed by related parties |
184
|
88
|
||
| Deposit |
524
|
558
|
||
| VAT receivable |
185
|
122
|
||
| Other receivables |
692
|
560
|
||
|
|
|
|
|
|
| Total other receivables and prepayments |
2,705
|
2,376
|
||
|
|
|
|
|
3.6 Provisions
Accounting policies
Provisions for sales rebates and discounts granted to government agencies, wholesalers, retail pharmacies, managed care and other customers are recorded at the time the related revenues are recorded or when the incentives are offered. They are calculated on the basis of historical experience and the specific terms in the individual agreements.
Provisions for legal disputes are recognised where a legal or constructive obligation has been incurred as a result of past events and it is probable that there will be an outflow of resources that can be reliably estimated. In this case, Novo Nordisk arrives at an estimate on the basis of an evaluation of the most likely outcome. Disputes for which no reliable estimate can be made are disclosed as contingent liabilities.
Novo Nordisk issues credit notes for expired goods as a part of normal business. Where there is historical experience or a reasonably accurate estimate of expected future returns can otherwise be made, a provision for estimated product returns is recorded. The provision is measured at gross sales value.
Provisions are measured at the present value of the anticipated expenditure for settlement of the legal or constructive obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.
Key accounting estimate – Provisions for sales rebates
Novo Nordisk records provisions and accruals for expected sales rebates, wholesaler charge-backs and other rebates, including Medicaid and Medicare in the US and similar rebates in other countries.
Such estimates are based on analyses of existing contractual or legal obligations, historical trends and the Group’s experience. They are calculated on the basis of a percentage of sales for each product as defined by the contracts with the various customer groups.
Provisions for sales rebates are adjusted to actual amounts as rebates, discounts and returns are processed. Please refer to note 2.1 for further information on sales rebates and provision.
Novo Nordisk considers the provision established for sales rebates to be reasonable and appropriate based on currently available information. However, the actual amount of rebates and discounts may differ from the amounts estimated by Management as more detailed information becomes available.
Key accounting estimate – Provisions for legal disputes
Provisions for legal disputes consist of various types of provisions linked to ongoing legal disputes. Management makes judgements about provisions and contingencies, including the probability of pending and potential future litigation outcomes which, by their very nature, are dependent on inherently uncertain future events. When determining likely outcomes of litigations etc, Management considers the input of external counsels on each case, as well as known outcomes in case law.
Although Management believes that the total provisions for legal pro ceedings are adequate based upon currently available information, there can be no assurance that there will not be any changes in facts or matters or that any future lawsuits, claims, proceedings or investigations will not be material.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
73
|
|
|
|
3.6 Provisions (continued)
| Provisions | ||||||||||||
|
Provisions
|
Provisions
|
Provisions
|
||||||||||
|
for
sales
|
for
legal
|
for
product
|
Other
|
2012
|
2011
|
|||||||
| DKK million |
rebates
|
disputes1
|
returns
|
provisions2
|
Total
|
Total
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At the beginning of the year |
5,666
|
1,554
|
555
|
489
|
8,264
|
6,667
|
||||||
| Additional provisions, including increases to existing provisions |
12,912
|
41
|
263
|
203
|
13,419
|
10,511
|
||||||
| Amount used during the year |
(10,954
|
)
|
–
|
(238
|
)
|
(63
|
)
|
(11,255
|
)
|
(8,228
|
)
|
|
| Adjustments, including unused amounts reversed during the year |
(187
|
)
|
(513
|
)
|
–
|
(68
|
)
|
(768
|
)
|
(782
|
)
|
|
| Effect of exchange rate adjustment |
(85
|
)
|
(25
|
)
|
2
|
11
|
(97
|
)
|
96
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At the end of the year |
7,352
|
1,057
|
582
|
572
|
9,563
|
8,264
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classified as follows: | ||||||||||||
| Non-current liabilities |
–
|
1,057
|
349
|
501
|
1,907
|
2,324
|
||||||
| Current liabilities |
7,352
|
–
|
233
|
71
|
7,656
|
5,940
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | Please refer to note 5.4 for further information on commitments and contingencies. |
| 2. | Other provisions consist of various types of provision including employee benefits such as jubilee benefits etc. |
3.7 Retirement benefit obligations
Accounting policies
Novo Nordisk operates a number of defined contribution plans throughout the world. Novo Nordisk’s contributions to the defined contribution plans are charged to the Income statement in the year to which they relate. In a few countries, Novo Nordisk still operates defined benefit plans; these are primarily located in Japan, Germany, the US and Switzerland. The costs for the year for defined benefit plans are determined using the projected unit credit method. This reflects services rendered by employees to the valuation dates and is based on actuarial assumptions primarily regarding discount rates used in determining the present value of benefits and projected rates of remuneration growth. Discount rates are based on the market yields of high-rated corporate bonds in the country concerned.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to other com prehensive income in the period in which they arise.
Past service costs are
recognised immediately in the Income statement.
Pension assets are only recognised to the extent that Novo Nordisk is able
to derive future economic benefits such as refunds from the plan or reductions
of future contributions.
The Group’s defined benefit plans are pension plans and medical plans and are usually funded by payments from Group companies and by employees to funds independent of Novo Nordisk. Where a plan is unfunded, a liability for the retirement obligation is recognised in the balance sheet. Costs recognised for post-employment benefits are included in Cost of goods sold, Sales and distribution costs, Research and development costs, and Administrative costs.
Other post-employment benefits mostly comprise post-retirement healthcare plans, principally in the US.
Please refer to note 1.2 for a description of the changed accounting policy for retirement benefit obligations.
Retirement benefit obligations
|
DKK
million
|
2012
|
2011
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Pension
|
Medical
|
|||||||
|
plans
|
benefits
|
Total
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
| At the beginning of the year |
1,125
|
238
|
1,363
|
1,452
|
||||
| Current service costs |
111
|
21
|
132
|
155
|
||||
| Interest costs |
37
|
10
|
47
|
52
|
||||
| Remeasurement (gains)/losses1 |
188
|
35
|
223
|
(29
|
)
|
|||
| Past service costs |
–
|
–
|
–
|
(27
|
)
|
|||
| Benefits paid |
(75
|
)
|
(5
|
)
|
(80
|
)
|
(75
|
)
|
| Curtailments2 |
–
|
–
|
–
|
(241
|
)
|
|||
| Exchange rate adjustment |
(36
|
)
|
(4
|
)
|
(40
|
)
|
43
|
|
| Other |
20
|
(1
|
)
|
19
|
33
|
|||
|
|
|
|
|
|
|
|
|
|
| At the end of the year |
1,370
|
294
|
1,664
|
3
|
1,363
|
3
|
||
|
|
|
|
|
|
|
|
|
| 1. | Remeasurement relates primarily to change in financial assumptions. |
| 2. | Curtailment relates to changes in defined benefit plans in Japan and the US in 2011. |
| 3. | Present value of partly funded retirement benefit obligations amounts to DKK 1,229 million (DKK 1,071 million in 2011). Present value of unfunded retirement benefit obligations amounts to DKK 435 million (DKK 292 million in 2011). |
Fair value of plan assets
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| At the beginning of the year |
859
|
766
|
||
| Interest income |
31
|
28
|
||
| Remeasurement gains/(losses) |
7
|
(20
|
)
|
|
| Employer contributions |
93
|
128
|
||
| Benefits paid to employees |
(80
|
)
|
(75
|
)
|
| Exchange rate adjustment |
(23
|
)
|
20
|
|
| Other |
17
|
12
|
||
|
|
|
|
|
|
| At the end of the year |
904
|
859
|
||
|
|
|
|
|
|
| Net retirement benefit obligations | ||||
| at the end of the year (unfunded)1 |
760
|
504
|
||
|
|
|
|
|
| 1. | Unrecognised remeasurements in 2011 amounted to DKK 65 million. Net retirement benefit obligation recognised in the Balance sheet in 2011 amounted to DKK 439 million. |
| The amount recognised in the Balance sheet is reported as non-current liabilities. | |
NOVO NORDISK ANNUAL REPORT 2012
| 74 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
3.7 Retirement benefit obligations (continued)
Net retirement benefit obligations
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| At the beginning of the year |
439
|
569
|
||
| Costs recognised in the Income statement1 |
150
|
(25
|
)
|
|
| Remeasurements recognised in | ||||
| Other comprehensive income2 |
281
|
–
|
||
| Exchange rate adjustment recognised in | ||||
| Other comprehensive income3 |
(17
|
)
|
23
|
|
| Employer contributions |
(93
|
)
|
(128
|
)
|
|
|
|
|
|
|
| At the end of the year |
760
|
439
|
||
|
|
|
|
|
| 1. | Costs in Income statement include service costs, net interests, curtailments and other. |
| 2. | Remeasurements charged to Other comprehensive income including effect of change in accounting policy in 2012 amounting to DKK 65 million. |
| 3. | Recognised in Other comprehensive income as part of Exchange rate adjustments of investments in subsidiaries. |
Please refer to note 5.4 for maturity analysis of net retirement benefit obligation.
Novo Nordisk does not expect the contributions over the next five years to differ significantly from current contributions.
Weighted average asset allocation of funded retirement obligations
|
2012
|
2011
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
DKK
|
DKK
|
|||||||
|
million
|
%
|
million
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
| Coverage insurance1 |
607
|
67
|
%
|
575
|
67
|
%
|
||
| Equities |
67
|
7
|
%
|
49
|
5
|
%
|
||
| Bonds |
214
|
24
|
%
|
152
|
18
|
%
|
||
| Cash at bank |
9
|
1
|
%
|
75
|
9
|
%
|
||
| Property |
7
|
1
|
%
|
8
|
1
|
%
|
||
|
|
|
|
|
|
|
|
|
|
| Total |
904
|
100
|
%
|
859
|
100
|
%
|
||
|
|
|
|
|
|
|
|
|
| 1. | Novo Nordisk’s defined benefit plans in Germany and Switzerland are reimbursed by the international insurer Allianz regardless of the value of the plan assets. The risk related to the funding in these countries is therefore counterparty risk against Allianz. |
| Assumptions used for valuation |
|
2012
|
2011
|
|||
|
|
|
|
|
|
| Discount rate |
3
|
% |
4
|
% |
| Projected future remuneration increases |
2
|
% |
2
|
% |
| Medical cost trend rate |
3
|
% |
3
|
% |
| Inflation rate |
2
|
% |
2
|
% |
|
|
|
|
|
|
Actuarial valuations are performed annually for all major defined benefit plans. Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and experience in each country.
Significant actuarial assumptions for the determination of the retirement benefit obligation are discount rate and expected future remuneration increases. The sensitivity analyses below have been determined based on reasonably likely changes in the assumptions occurring at the end of the period.
|
1%-point
|
1%-point
|
|||
| DKK million |
increase
|
decrease
|
||
|
|
|
|
|
|
| Discount rate |
(237
|
)
|
309
|
|
| Future remuneration |
77
|
(57
|
)
|
|
|
|
|
|
|
3.8 Other liabilities
Other liabilities
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Employee costs payable |
3,748
|
3,369
|
||
| Accruals |
3,697
|
2,992
|
1
|
|
| VAT and duties payable |
703
|
537
|
||
| R&D clinical trials |
229
|
211
|
||
| Other payables2 |
605
|
1,425
|
||
|
|
|
|
|
|
| Total other liabilities |
8,982
|
8,534
|
||
|
|
|
|
|
| 1. | Including reclassification to deferred income tax liabilities of DKK 739 million in 2012 (note 2.4). |
| 2. | Other payables primarily relates to royalty payments and deferred income. |
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
75
|
|
|
|
Section 4
Capital structure and financing items
This section encompasses notes related to Novo Nordisk’s capital structure and financing items. Further information on the company’s capital structure can be found in ‘Shares and capital structure’ on pp 44 – 45.
Novo Nordisk’s guiding principle on capital structure is that excess cash flow – after funding of organic growth opportunities, research and development, and potential licensing and acquisitions – is returned to the company’s shareholders. Novo Nordisk applies a pharmaceutical industry average payout ratio to dividend payments, complemented by share repurchase programmes. The main financial risk is foreign exchange exposure, where Novo Nordisk intends to reduce the short-term impact from the movement in key currencies by hedging future cash flows.
4.1 Share capital and earnings per share
Share capital
|
A
share
|
B
share
|
Total
share
|
|||||
| DKK million |
capital
|
capital
|
capital
|
||||
|
|
|
|
|
|
|
|
|
| Development in share capital: | |||||||
| 2008 |
107
|
527
|
634
|
||||
| 2009 |
–
|
(14
|
)
|
(14
|
)
|
||
| 2010 |
–
|
(20
|
)
|
(20
|
)
|
||
| 2011 |
–
|
(20
|
)
|
(20
|
)
|
||
|
|
|
|
|
|
|
|
|
| At the beginning of the year |
107
|
473
|
580
|
||||
| 2012 |
–
|
(20
|
)
|
(20
|
)
|
||
|
|
|
|
|
|
|
|
|
| At the end of the year |
107
|
453
|
560
|
||||
|
|
|
|
|
|
|
|
At the end of 2012, the share capital amounted to DKK 107 million in A share capital (equal to 107 million A shares of DKK 1) and DKK 453 million in B share capital (equal to 453 million B shares of DKK 1).
Treasury shares
Accounting policies
Treasury shares are deducted from the share capital at their nominal value of DKK 1 per share. Differences between this amount and the amount paid to acquire or received for disposing of, treasury shares are deducted from Retained earnings.
|
2012
|
2011
|
|||||||||
|
Number
of
|
Number
of
|
|||||||||
|
As
% of share
|
As
% of share
|
B
Shares
|
B
Shares
|
|||||||
|
Market
value
|
capital
before
|
capital
after
|
of
DKK 1
|
of
DKK 1
|
||||||
|
DKK
million
|
cancellation
|
cancellation
|
(million)
|
(million)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Holding at the beginning of the year |
16,131
|
4.2
|
%
|
24
|
28
|
|||||
| Cancellation of treasury shares |
(13,200
|
)
|
(3.4
|
%)
|
(20
|
)
|
(20
|
)
|
||
|
|
|
|
|
|
|
|
|
|
|
|
| Holding of treasury shares, adjusted for cancellation |
2,931
|
0.8
|
%
|
0.8
|
%
|
4
|
8
|
|||
| Purchase during the year |
12,162
|
2.6
|
%
|
15
|
18
|
|||||
| Sale during the year |
(266
|
)
|
(0.3
|
%)
|
(2
|
)
|
(2
|
)
|
||
| Value adjustment |
1,135
|
–
|
–
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Holding at the end of the year |
15,962
|
3.1
|
%
|
17
|
24
|
|||||
|
|
|
|
|
|
|
|
|
|
|
The purchase of treasury shares during the year relates to the remaining part of the 2011 share repurchase programme totalling DKK 1.1 billion and the DKK 12 billion share repurchase programme of Novo Nordisk B shares for 2012 of which DKK 1 billion remains at year end. The programme ends at 29 January 2013. The purpose of the programmes is to reduce the company’s share capital. Sale of treasury shares relates to exercised share options, long-term share-based incentive programme, employee share savings programmes and employee shares.
At year-end the holding of treasury shares amounts to 17,416,676 shares (24,440,186 shares in 2011). At year-end 3.5 million shares of the holding of treasury B shares are regarded as hedges for the long-term share-based incentive programme and share options to employees.
Dividend
At the end of 2012, proposed dividends (not yet declared) of DKK 9,715 million (DKK 18.00 per share) are included in Retained earnings.
The declared dividend included in Retained earnings was DKK 7,742 million (DKK 14.00 per share) in 2011 and DKK 5,700 million (DKK 10.00 per share) in 2010. No dividend is declared on treasury shares.
NOVO NORDISK ANNUAL REPORT 2012
| 76 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
4.1 Share capital and earnings per share (continued)
Earnings per share
Accounting policies
Earnings per share (EPS) is presented as both basic earnings per share and diluted earnings per share.
Basic earnings per share is calculated as net profit divided by the average number of shares outstanding.
Diluted earnings per share is calculated as net profit divided by the sum of average number of shares outstanding, including the dilutive effect of share options ‘in the money’. The dilutive effect of share options ‘in the money’ is calculated as the difference between the following:
1) the number of shares that could have been acquired at fair value with proceeds from the exercise of the share options
2) the number of shares that would have been issued assuming the exercise of the share options.
The difference (the dilutive effect) is added to the denominator as an issue of shares for no consideration.
| DKK million |
2012
|
2011
|
2010
|
|||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year |
21,432
|
17,097
|
14,403
|
|||||
|
|
|
|
|
|
|
|
|
|
| Average number of shares outstanding |
in
1,000 shares
|
548,338
|
565,433
|
580,438
|
||||
| Dilutive effect of outstanding share bonus pool and options ‘in the money’1 |
in
1,000 shares
|
3,330
|
4,699
|
5,039
|
||||
|
|
|
|
|
|
|
|
|
|
| Average number of shares outstanding, including dilutive effect of options ‘in the money’ |
in
1,000 shares
|
551,668
|
570,132
|
585,477
|
||||
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share1 |
DKK
|
39.09
|
30.24
|
24.81
|
||||
| Diluted earnings per share1 |
DKK
|
38.85
|
29.99
|
24.60
|
||||
|
|
|
|
|
|
|
|
|
1. For further information on outstanding share bonus pool and options, refer to note 5.1.
4.2 Debt
Accounting policies
Loans are recognised initially at fair value, net of transaction costs incurred. Loans are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Income statement over the period of the loans using the effective interest method. Loans are classified as Current debt unless Novo Nordisk has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.
Debt
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Loans1 |
–
|
502
|
||
| Current debt (bank overdrafts) |
500
|
351
|
||
| Derivative financial instruments (note 4.4) |
48
|
1,492
|
||
|
|
|
|
|
|
| Total debt |
548
|
2,345
|
||
|
|
|
|
|
|
| The debt is denominated in the following | ||||
| currencies: | ||||
| DKK |
20
|
82
|
||
| EUR |
1
|
501
|
||
| USD |
53
|
983
|
||
| JPY |
0
|
404
|
||
| Other currencies |
474
|
375
|
||
|
|
|
|
|
|
| Total debt |
548
|
2,345
|
||
|
|
|
|
|
1. A loan of DKK 502 million with maturity in 2022 has been repaid during 2012.
4.3 Financial risk
Novo Nordisk has centralised management of the Group’s financial risks. The overall objectives and policies for the company’s financial risk management are outlined in an internal Treasury Policy, which is approved by the Board of Directors. The Treasury Policy consists of the Foreign Exchange Policy, the Investment Policy, the Financing Policy and the Policy regarding Credit Risk on Financial Counterparts, and includes a description of permitted financial instruments and risk limits.
Novo Nordisk only hedges commercial exposures and consequently does not enter into derivative transactions for trading or speculative purposes. Novo Nordisk uses a fully integrated Treasury Management System to manage all financial positions. All positions are marked-to-market based on real-time quotes, and risk is assessed using generally accepted standards.
Foreign exchange risk
Foreign exchange risk is the principal financial risk for Novo Nordisk and as such has a significant impact on the Income statement, Other comprehensive income, the Balance sheet and the Statement of cash flows.
The majority of Novo Nordisk’s sales are in EUR, USD, JPY, CNY and GBP. Consequently, Novo Nordisk’s foreign exchange risk is most significant in USD, JPY, CNY and GBP, while the EUR exchange rate risk is regarded as low due to the Denmark’s fixed-rate policy towards EUR.
The overall objective of foreign exchange risk management is to limit the short-term negative impact of exchange rate fluctuations on earnings and cash flow, thereby increasing the predictability of the financial results.
Novo Nordisk hedges existing assets and liabilities in key currencies as well as future expected cash flows up to a maximum of 24 months forward. During 2012, the hedging horizon varied between 11 and 13 months for USD, JPY, CNY and GBP. Currency hedging is based upon expectations of future exchange rates and mainly uses foreign exchange forwards and foreign exchange options matching the due dates of the hedged items. Expected cash flows are continually assessed using historical inflows, budgets and monthly sales forecasts. Hedge effectiveness is assessed on a regular basis.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
77
|
|
|
|
4.3 Financial risk (continued)
Key currencies
| Exchange rate | ||||||||
| DKK per 100 |
USD
|
JPY
|
CNY
|
GBP
|
||||
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||
| Average |
579
|
7.27
|
92
|
918
|
||||
| End of year |
566
|
6.57
|
91
|
913
|
||||
| Year-end change |
-1.6
|
%
|
-11.5
|
%
|
0.0
|
%
|
2.6
|
%
|
| 2011 | ||||||||
| Average |
536
|
6.73
|
83
|
859
|
||||
| End of year |
575
|
7.42
|
91
|
890
|
||||
| Year-end change |
2.5
|
%
|
7.7
|
%
|
7.1
|
%
|
2.7
|
%
|
|
|
|
|
|
|
|
|
|
The financial contracts existing at the end of the year cover the expected future cash flow for the following number of months:
|
2012
|
2011
|
|||
|
|
|
|
|
|
| USD |
12
months
|
12
months
|
||
| JPY |
13
months
|
12
months
|
||
| CNY1 |
12
months
|
12
months
|
||
| GBP |
12
months
|
12
months
|
||
|
|
|
|
|
1. USD used as proxy when hedging Novo Nordisk’s CNY currency exposure.
Foreign exchange sensitivity analysis:
A 5% increase/decrease in the following currencies will impact Novo Nordisk’s operating profit as outlined in the table below:
|
Estimated
for
|
|||||
| DKK million |
2013
|
2012
|
|||
|
|
|
|
|
|
|
| USD |
975
|
775
|
|||
| JPY |
200
|
170
|
|||
| CNY |
110
|
100
|
|||
| GBP |
85
|
75
|
|||
|
|
|
|
|
|
A 5% increase/decrease in all other currencies versus EUR and DKK would affect the hedging instruments’ impact on Other comprehensive income and the Income statement as outlined in the table below:
|
5%
increase in all
|
5%
decrease in all
|
||||
|
currencies
against
|
currencies
against
|
||||
| DKK million |
DKK
and EUR
|
DKK
and EUR
|
|||
|
|
|
|
|
|
|
| 2012 | |||||
| Other comprehensive income |
(1,313
|
)
|
1,376
|
||
| Income statement |
(117
|
)
|
106
|
||
|
|
|
|
|
|
|
| Total |
(1,430
|
)
|
1,482
|
||
|
|
|
|
|
|
| 2011 | |||||
| Other comprehensive income |
(1,011
|
)
|
1,026
|
||
| Income statement |
54
|
(38
|
)
|
||
|
|
|
|
|
|
|
| Total |
(957
|
)
|
988
|
||
|
|
|
|
|
|
The higher foreign exchange sensitivities in 2012, compared with 2011, are primarily a result of higher expected future cash flow.
The financial instruments included in the foreign exchange sensitivity analysis are the Group’s Cash, Trade receivables and Trade payables, Current and non-current loans, Current and non-current financial investments, Foreign exchange forwards and Foreign exchange options hedging transaction exposure, Interest rate swaps and Cross-currency swaps.
Not included are anticipated currency transactions, investments and non-current assets.
Interest rate risk
In general, DKK and EUR interest rates declined in 2012. The Danish two-year interest rate was 0.53% at the end of 2012, down from 1.08% at the end of 2011. The three-month Cibor interest rate was 0.28% at the end of 2012, down from 1.00% at the end of 2011.
Changes in interest rates affect Novo Nordisk’s financial instruments. At the end of 2012, a 1 percentage point increase in the interest rate level would, all else being equal, result in a decrease in the fair value of Novo Nordisk’s financial instruments of DKK 20 million (a decrease in the fair value of DKK 17 million in 2011).
The financial instruments included in the sensitivity analysis consist of marketable securities, deposits, current and non-current loans, interest rate swaps and cross-currency swaps. Not included are foreign exchange forwards and foreign exchange options due to the limited effect that a parallel shift in interest rates in all currencies has on these instruments.
Liquidity risk
Novo Nordisk ensures availability of required liquidity through a combination of cash management, highly liquid investment portfolios and uncommitted as well as committed facilities. Novo Nordisk uses cash pools for optimisation and centralisation of cash management. For non-cash pool affiliates, surplus cash above the balance required for working capital management is deposited centrally.
Credit risk
Credit risk arises from the possibility that counterparties to transactions may default on their obligations, causing financial losses for the Group. Novo Nordisk considers its maximum credit risk on financial assets to be DKK 17,036 million (2011: DKK 17,550 million). In addition, Novo Nordisk considers its maximum credit risk on Trade receivables, Other receivables less prepayments and Other financial assets to be DKK 11,539 million (2011: DKK 11,024 million). Please refer to note 4.7 for details of the Group’s total financial assets.
To manage credit risk on financial counterparties, Novo Nordisk only enters into derivative financial contracts and money market deposits with financial counterparties possessing a satisfactory long-term credit rating from both Standard and Poor’s and Moody’s. Furthermore, maximum credit lines defined for each counterparty diversify the overall counterparty risk. The credit risk on bonds is limited as investments are made in highly liquid bonds with solid credit ratings. The table below shows Novo Nordisk’s credit exposure on cash, fixed-income marketable securities and financial derivatives.
Credit exposure on Cash at bank or on hand, Marketable securities and Derivative financial instruments (market value)
|
Cash
at
|
Derivative
|
|||||||
|
bank
or
|
Marketable
|
financial
|
||||||
| DKK million |
on
hand
|
securities
|
instruments
|
Total
|
||||
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||
| AAA-range |
4,544
|
4,544
|
||||||
| AA-range |
6,930
|
466
|
7,396
|
|||||
| A-range |
4,011
|
180
|
4,191
|
|||||
| BBB-range |
469
|
285
|
754
|
|||||
| Not rated or | ||||||||
| below BBB-range |
143
|
8
|
151
|
|||||
|
|
|
|
|
|
|
|
|
|
| Total |
11,553
|
4,552
|
931
|
17,036
|
||||
|
|
|
|
|
|
|
|
|
| 2011 | ||||||||
| AAA-range |
4,083
|
4,083
|
||||||
| AA-range |
6,223
|
16
|
6,239
|
|||||
| A-range |
7,156
|
32
|
7,188
|
|||||
| BBB-range | ||||||||
| Not rated or | ||||||||
| below BBB-range |
29
|
11
|
40
|
|||||
|
|
|
|
|
|
|
|
|
|
| Total |
13,408
|
4,094
|
48
|
17,550
|
||||
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 78 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
4.3 Financial risk (continued)
Credit risk on Trade receivables and Other receivables and prepayments is less material as Novo Nordisk has no significant concentration of credit risk, with exposure being spread over a large number of counterparties and customers. However, due to the troubled economic climate in the Eurozone, the Group continues to focus on the development in the outstanding trade receivables from this region. Novo Nordisk also continues to monitor the credit exposure in Region International Operations due to the increasing sales and low credit ratings of many countries in this region.
Please refer to note 2.2 for split of allowance for trade receivables by geographical segment.
Capital structure
Novo Nordisk’s capital structure is characterised by a substantial equity ratio. This is in line with the general capital structure of the pharmaceutical industry and reflects the inherent long-term investment horizons in an industry with typically more than 10 years’ development time for pharmaceutical products. Novo Nordisk’s equity ratio, calculated as equity to total liabilities, was 61.9% at the end of the year (57.9% at the end of 2011).
4.4 Derivative financial instruments
Accounting policies
The derivative financial instruments are used to manage the exposure to market risk. None of the derivatives are held for trading. However, not all derivatives are designated for hedge accounting.
Novo Nordisk uses forward exchange contracts and currency options to hedge forecast transactions and assets and liabilities. Currently, net investments in foreign subsidiaries are not hedged.
Upon initiation of the contract, Novo Nordisk designates each derivative financial contract that qualifies for hedge accounting as one of:
| • | hedges of the fair value of a recognised asset or liability or a firm commitment (fair value hedge) |
| • | hedges of the fair value of a forecast financial transaction (cash flow hedge) |
| • | hedges of a net investment in a foreign operation (net investment hedge). |
All contracts are initially recognised at fair value and subsequently remeasured at their fair values based on current bid prices at the end of the reporting period.
Forward exchange contracts recognised as hedging assets or liabilities in foreign currencies are measured at fair value at the end of the reporting period. Value adjustments are recognised in the Income statement along with any value adjustments of the hedged asset or liability that is attributable to the hedged risk.
The value adjustments on forward exchange contracts designated as hedges of forecast transactions are recognised directly in Other comprehensive income, given hedge effectiveness. The cumulative value adjustment of these contracts is transferred from Other compre hensive income to the Income statement as a reclassification adjustment under Financial income or Financial expenses when the hedged transaction is recognised in the Income statement.
Currency swaps used to hedge net investments in subsidiaries are measured at fair value based on the difference between the swap exchange rate and the exchange rate at the end of the reporting period. The value adjustment is recognised in Other comprehensive income.
Furthermore, Novo Nordisk uses currency option hedges of forecast transactions. Currency options are initially recognised at cost, which equals fair value of considerations paid, and subsequently remeasured at their fair values at the end of the reporting period. The cumulative value adjustment of the currency options for which hedge accounting is applied, which is the intrinsic value of the options, is transferred from Other comprehensive income to the Income statement as a reclassification adjustment under Financial income or Financial expenses when the hedged transaction is recognised in the Income statement. Gains and losses on currency options that do not meet the criteria for hedge accounting are recognised directly in the Income statement under Financial income or Financial expenses.
The fair value of financial assets and liabilities is measured on the basis of quoted market prices of financial instruments traded in active markets. If an active market exists, fair value is based on the most recently observed market price at the end of the reporting period.
If a financial instrument is quoted in a market that is not active, Novo Nordisk bases its valuation on the most recent transaction price. Adjustment is made for subsequent changes in market conditions, for instance by including transactions in similar financial instruments that are assumed to be motivated by normal business considerations.
If an active market does not exist, the fair value of standard and simple financial instruments, such as foreign exchange forward contracts, interest rate swaps, currency swaps and unlisted bonds, is measured according to generally accepted valuation techniques. Market-based parameters are used to measure fair value.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Income statement under Financial income or Financial expenses.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
79
|
|
|
|
4.4 Derivative financial instruments (continued)
| Hedging activities |
2012
|
2011
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Contract
|
Positive
|
Negative
|
Contract
|
Positive
|
Negative
|
|||||||
|
amount
|
fair
value
|
fair
value
|
amount
|
fair
value
|
fair
value
|
|||||||
| DKK million |
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Forward contracts, cash flow hedges |
25,639
|
732
|
18,906
|
1,256
|
||||||||
| Currency options, cash flow hedges |
2,755
|
134
|
4,805
|
116
|
||||||||
| Forward contracts, fair value hedges |
2,521
|
95
|
48
|
2,534
|
176
|
|||||||
| Cross-currency swaps, net investment hedges1 |
166
|
56
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total currency-related instruments |
30,915
|
961
|
48
|
26,411
|
116
|
1,488
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest rate swaps, cash flow hedges |
250
|
4
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total interest-related instruments |
–
|
–
|
–
|
250
|
–
|
4
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total hedging activities |
30,915
|
961
|
48
|
26,661
|
116
|
1,492
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total derivatives included in: | ||||||||||||
| Derivative financial instruments (current assets) |
931
|
48
|
||||||||||
| Derivative financial instruments (current liabilities) |
48
|
1,492
|
||||||||||
| Equity, Other reserves |
30
|
68
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
1. No net investment hedge exist at year-end 2012. In 2011, the financial contract existing at the end of the year hedged 13% of the net investments in JPY.
Presentation in the Income statement and Other comprehensive income
| 2012 | 2011 | |||||||
|
|
|
|
|
|
|
|||
|
Positive
|
Negative
|
Positive
|
Negative
|
|||||
|
fair
value
|
fair
value
|
fair
value
|
fair
value
|
|||||
| DKK million |
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
||||
|
|
|
|
|
|
|
|
|
|
| Cash flow hedges for which hedge accounting is not applied |
19
|
48
|
8
|
|||||
| Fair value hedges |
95
|
48
|
176
|
|||||
|
|
|
|
|
|
|
|
|
|
| Total fair value adjustments through the Income statement |
114
|
48
|
48
|
184
|
||||
|
|
|
|
|
|
|
|
|
|
| Cash flow hedges for which hedge accounting is applied |
847
|
68
|
1,252
|
|||||
| Net investment hedges (included in exchange rate adjustment) |
56
|
|||||||
|
|
|
|
|
|
|
|
|
|
| Total fair value adjustments through Other comprehensive income |
847
|
–
|
68
|
1,308
|
||||
|
|
|
|
|
|
|
|
|
|
| Total fair value adjustments |
961
|
48
|
116
|
1,492
|
||||
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 80 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
4.4 Derivative financial instruments (continued)
Hedging of forecast transactions (cash flow hedge)
|
2012
|
2011
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Contract
|
Positive
|
Negative
|
Contract
|
Positive
|
Negative
|
|||||||
|
amount
|
fair
value
|
fair
value
|
amount
|
fair
value
|
fair
value
|
|||||||
| DKK million |
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hedging of forecast transactions qualifying | ||||||||||||
| for hedge accounting | ||||||||||||
| USD |
19,939
|
409
|
14,250
|
896
|
||||||||
| JPY, GBP and other currencies |
5,700
|
323
|
4,656
|
360
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total forward contracts (forecasted cash flow) |
25,639
|
732
|
–
|
18,906
|
–
|
1,256
|
||||||
| USD |
2,402
|
72
|
4,007
|
66
|
||||||||
| JPY |
353
|
43
|
798
|
2
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total currency options (forecasted cash flow) |
2,755
|
115
|
–
|
4,805
|
68
|
–
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total interest rate swaps (variable payments | ||||||||||||
| on debt instruments) EUR /EUR |
–
|
–
|
–
|
250
|
–
|
(4
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash flow hedges for which hedge | ||||||||||||
| accounting is applied |
28,394
|
847
|
–
|
23,961
|
68
|
1,252
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other forecast transaction hedges for which | ||||||||||||
| hedge accounting is not applied | ||||||||||||
| Currency options and interest rate swaps | ||||||||||||
| for which hedge accounting is not applied |
–
|
19
|
–
|
–
|
48
|
8
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total contracts of forecast transactions |
28,394
|
866
|
–
|
23,961
|
116
|
1,260
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedging of assets and liabilities (fair value hedge)
|
2012
|
2011
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Contract
|
Positive
|
Negative
|
Contract
|
Positive
|
Negative
|
|||||||
|
amount
|
fair
value
|
fair
value
|
amount
|
fair
value
|
fair
value
|
|||||||
| DKK million |
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
at
year-end
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| USD |
698
|
30
|
478
|
81
|
||||||||
| JPY |
444
|
95
|
731
|
72
|
||||||||
| GBP |
365
|
18
|
376
|
7
|
||||||||
| Other |
1,014
|
949
|
16
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total forward contracts |
2,521
|
95
|
48
|
2,534
|
–
|
176
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
The table above shows the fair value of fair value-hedging activities for 2012 and 2011 specified by hedging instrument and the major currencies. All changes in fair values are recognised in the Income statement, amounting to a net gain of DKK 47 million in 2012 (a net loss of DKK 176 million in 2011). As the hedges are highly effective, the net gain or loss on the hedged items is similar to the net loss or gain on the hedging instruments.
The financial contracts existing at the end of the year hedge the currency exposure on assets and liabilities in the Group’s major currencies other than DKK and EUR, ie primarily assets and liabilities in USD, JPY and GBP. ‘Other’ comprises AUD at DKK 475 million (DKK 399 million in 2011), CAD at DKK 138 million (DKK 170 million in 2011) and PLN at DKK 401 million (DKK 380 million in 2011).
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
81
|
|
|
|
4.5 Cash and cash equivalents
Accounting policies
Cash and cash equivalents consist of cash and marketable securities with original maturity of less than three months offset by short-term bank loans. Financial resources consist of cash and cash equivalents, bonds with original term to maturity exceeding three months and undrawn committed credit facilities expiring after more than one year.
Cash and cash equivalents
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Cash at bank and on hand (note 4.3) |
11,553
|
13,408
|
12,017
|
|||
| Bank overdrafts (note 4.2) |
(500
|
)
|
(351
|
)
|
(57
|
)
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents | ||||||
| at the end of the year |
11,053
|
13,057
|
11,960
|
|||
|
|
|
|
|
|
|
4.6 Change in working capital
Accounting policies
Working capital is defined as current assets less current liabilities.
It measures how much in liquid assets Novo Nordisk has available for the business.
Change in working capital
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Trade receivables |
(290
|
)
|
(849
|
)
|
(1,437
|
)
|
| Other receivables and prepayments |
(329
|
)
|
27
|
(441
|
)
|
|
| Inventories |
(110
|
)
|
256
|
327
|
||
| Trade payables |
568
|
385
|
664
|
|||
| Other liabilities |
448
|
580
|
1,141
|
|||
| Exchange rate adjustments |
(13
|
)
|
35
|
43
|
||
|
|
|
|
|
|
|
|
| Total change in working capital |
274
|
434
|
297
|
|||
|
|
|
|
|
|
|
|
4.7 Financial assets and liabilities
Accounting policies
Novo Nordisk classifies its investments in the following categories:
| • | Available-for-sale financial assets |
| • | Loans and receivables |
| • | Financial assets at fair value through the Income statement (derivatives). |
The classification depends on the purpose for which the investments were made. Management determines the classification of its investments on initial recognition and re-evaluates this at the end of every reporting period to the extent that such a classification is permitted and required.
Recognition and measurement
Purchases and sales of investments are recognised on the settlement date. Investments are initially recognised at fair value.
Available-for-sale financial assets and financial assets at fair value are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.
Fair value disclosures are made separately for each class of financial instruments at the end of the reporting period.
Derecognition
Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred, and Novo Nordisk has transferred substantially all risks and rewards of ownership.
Available-for-sale financial assets
Available-for-sale financial assets consist of equity investments and marketable securities and are included in Other financial assets unless Management intends to dispose of the investment within 12 months of the end of the reporting period. If that is the case, the current part is included in Other receivables and prepayments.
Unrealised gains and losses arising from changes in the fair value of financial assets classified as available for sale are recognised in Other comprehensive income. When financial assets classified as available for sale are sold or impaired, the accumulated fair value adjustments are included in the Income statement.
The fair values of quoted investments (including bonds) are based on current bid prices at the end of the reporting period. Financial assets for which no active market exists are carried at fair value based on a valuation methodology or at cost if no reliable valuation model can be applied.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. If collection is expected within one year (or in the normal operating cycle of the business if longer), they are classified as Current assets. If not, they are presented as Non-current assets.
Trade receivables and Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for allowances. Provision for allowances is made for trade receivables when there is objective evidence that Novo Nordisk will not be able to collect all amounts due according to the original terms of the receivables.
The provision for allowances is deducted from the carrying amount of Trade receivables and the amount of the loss is recognised in the Income statement under Sales and distribution costs. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against Sales and distribution costs in the Income statement.
NOVO NORDISK ANNUAL REPORT 2012
| 82 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
4.7 Financial assets and liabilities (continued)
| Financial assets and liabilities |
Financial
|
|||||||||
|
assets
|
||||||||||
|
Available-
|
measured
at
|
|||||||||
|
for-sale
|
fair
value
|
|||||||||
|
financial
|
through
the
|
Loans
|
Cash
|
|||||||
|
assets
at
|
Income
|
and
|
and
cash
|
|||||||
| DKK million |
fair
value
|
statement
|
receivables
|
equivalents
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||||
| Other financial assets |
147
|
81
|
228
|
|||||||
| Trade receivables (note 3.4) |
9,639
|
9,639
|
||||||||
| Other receivables (note 3.5) |
2,705
|
2,705
|
||||||||
| – less prepayments (note 3.5) |
(1,033
|
)
|
(1,033
|
)
|
||||||
| Marketable securities (bonds) (note 4.3)1 |
4,552
|
4,552
|
||||||||
| Derivative financial instruments (note 4.4) |
931
|
931
|
||||||||
| Cash at bank and on hand (note 4.5) |
11,553
|
11,553
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total financial assets at the end of the year by category |
4,699
|
931
|
11,392
|
11,553
|
28,575
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
Financial
|
Financial
|
|||||||
|
liabilities
|
liabilities
|
|||||||
|
measured
at
|
Financial
|
measured
at
|
||||||
|
fair
value
|
liabilities
|
fair
value
|
||||||
|
through
the
|
measured
at
|
through
Other
|
||||||
|
Income
|
amortised
|
comprehensive
|
||||||
| DKK million |
statement
|
cost
|
income
|
Total
|
||||
|
|
|
|
|
|
|
|
|
|
| Current debt (note 4.2) |
500
|
500
|
||||||
| Trade payables |
3,859
|
3,859
|
||||||
| Other liabilities (note 3.8) |
8,982
|
8,982
|
||||||
| – less VAT and duties payable (note 3.8) |
(703
|
)
|
(703
|
)
|
||||
| Derivative financial instruments (note 4.4) |
48
|
48
|
||||||
|
|
|
|
|
|
|
|
|
|
| Total financial liabilities at the end of the year by category |
48
|
12,638
|
–
|
12,686
|
||||
|
|
|
|
|
|
|
|
|
|
Financial
|
||||||||||
|
assets
|
||||||||||
|
Available-
|
measured
at
|
|||||||||
|
for-sale
|
fair
value
|
|||||||||
|
financial
|
through
the
|
Loans
|
Cash
|
|||||||
|
assets
at
|
Income
|
and
|
and
cash
|
|||||||
| DKK million |
fair
value
|
statement
|
receivables
|
equivalents
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2011 | ||||||||||
| Other financial assets |
230
|
43
|
273
|
|||||||
| Trade receivables (note 3.4) |
9,349
|
9,349
|
||||||||
| Other receivables (note 3.5) |
2,376
|
2,376
|
||||||||
| – less prepayments (note 3.5) |
(935
|
)
|
(935
|
)
|
||||||
| Marketable securities (bonds) (note 4.3)1 |
4,094
|
4,094
|
||||||||
| Derivative financial instruments (note 4.4) |
48
|
48
|
||||||||
| Cash at bank and on hand (note 4.5) |
13,408
|
13,408
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total financial assets at the end of the year by category |
4,324
|
48
|
10,833
|
13,408
|
28,613
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
Financial
|
Financial
|
|||||||
|
liabilities
|
liabilities
|
|||||||
|
measured
at
|
Financial
|
measured
at
|
||||||
|
fair
value
|
liabilities
|
fair
value
|
||||||
|
through
the
|
measured
at
|
through
Other
|
||||||
|
Income
|
amortised
|
comprehensive
|
||||||
| DKK million |
statement
|
cost
|
income
|
Total
|
||||
|
|
|
|
|
|
|
|
|
|
| Loans (note 4.2) |
502
|
502
|
||||||
| Current debt (note 4.2) |
351
|
351
|
||||||
| Trade payables |
3,291
|
3,291
|
||||||
| Other liabilities (note 3.8) |
8,534
|
8,534
|
||||||
| – less VAT and duties payable (note 3.8) |
(537
|
) |
(537
|
) | ||||
| Derivative financial instruments (note 4.4) |
184
|
1,308
|
1,492
|
|||||
|
|
|
|
|
|
|
|
|
|
| Total financial liabilities at the end of the year by category |
184
|
12,141
|
1,308
|
13,633
|
||||
|
|
|
|
|
|
|
|
|
| 1. | Including Danish AAA-rated mortgage bonds issued by Danish credit institutions governed by the Danish Financial Supervisory Authority of DKK 4,544 million (DKK 4,083 million in 2011); refer to note 4.3. Redemption yield on the bond portfolio is 0.73%. |
For a description of the credit quality of financial assets such as Trade receivables, Cash at bank and on hand, Marketable securities, Current debt and Derivative financial instruments, refer to notes 4.3 and 4.4.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
83
|
|
|
|
4.7 Financial assets and liabilities (continued)
| Maturity analysis | ||||||||||
|
Maturity
|
||||||||||
|
Equity
|
Maturity
|
>
1 year
|
Maturity
|
|||||||
| DKK million |
investments
|
<
1 year
|
<
5 years
|
>
5 years
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||||
| Other financial assets |
147
|
81
|
228
|
|||||||
| Trade receivables (note 3.4) |
9,639
|
9,639
|
||||||||
| Other receivables (note 3.5) |
2,705
|
2,705
|
||||||||
| – less prepayments (note 3.5) |
(1,033
|
)
|
(1,033
|
) | ||||||
| Marketable securities (bonds) (note 4.3) |
3,318
|
1,234
|
4,552
|
|||||||
| Derivative financial instruments (note 4.4) |
845
|
86
|
931
|
|||||||
| Cash at bank and on hand (note 4.5) |
11,553
|
11,553
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets at the end of the year by maturity |
147
|
27,027
|
1,320
|
81
|
28,575
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Current debt (note 4.2) |
500
|
500
|
||||||||
| Trade payables |
3,859
|
3,859
|
||||||||
| Other liabilities (note 3.8) |
8,982
|
8,982
|
||||||||
| - less VAT and duties payable (note 3.8) |
(703
|
)
|
(703
|
) | ||||||
| Derivative financial instruments (note 4.4) |
48
|
48
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities at the end of the year by maturity |
12,686
|
–
|
–
|
12,686
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2011 | ||||||||||
| Other financial assets |
230
|
43
|
273
|
|||||||
| Trade receivables (note 3.4) |
9,349
|
9,349
|
||||||||
| Other receivables (note 3.5) |
2,376
|
2,376
|
||||||||
| – less prepayments (note 3.5) |
(935
|
)
|
(935
|
)
|
||||||
| Marketable securities (bonds) (note 4.3) |
2,311
|
1,783
|
4,094
|
|||||||
| Derivative financial instruments (note 4.4) |
48
|
48
|
||||||||
| Cash at bank and on hand (note 4.5) |
13,408
|
13,408
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets at the end of the year by maturity |
230
|
26,557
|
1,783
|
43
|
28,613
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Loans (note 4.2) |
196
|
306
|
502
|
|||||||
| Current debt (note 4.2) |
351
|
351
|
||||||||
| Trade payables |
3,291
|
3,291
|
||||||||
| Other liabilities (note 3.8) |
8,534
|
8,534
|
||||||||
| – less VAT and duties payable (note 3.8) |
(537
|
)
|
(537
|
)
|
||||||
| Derivative financial instruments (note 4.4) |
1,400
|
92
|
1,492
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities at the end of the year by maturity |
13,039
|
288
|
306
|
13,633
|
||||||
|
|
|
|
|
|
|
|
|
|
|
| Fair value measurement hierarchy | ||||||||
|
Directly
or
|
||||||||
|
Active
|
indirectly
|
Not
based on
|
||||||
|
market
|
observable
|
observable
|
||||||
| DKK million |
data
|
market
data
|
market
data
|
Total
|
||||
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||
| Total financial assets at fair value |
4,625
|
931
|
74
|
5,630
|
||||
| Total financial liabilities at fair value |
–
|
48
|
–
|
48
|
||||
|
|
|
|
|
|
|
|
|
|
| 2011 | ||||||||
| Total financial assets at fair value |
4,153
|
48
|
171
|
2 |
4,372
|
|||
| Total financial liabilities at fair value |
–
|
1,492
|
–
|
1,492
|
||||
|
|
|
|
|
|
|
|
|
| 2. | Including reclassification of DKK 39 million regarding investment in associated company. |
Financial assets and liabilities measured at fair value can be categorised using the fair value measurement hierarchy above. There have not been any transfers between the categories ’Active market data’ and ’Directly or indirectly observable market data’ during 2012 or 2011.
NOVO NORDISK ANNUAL REPORT 2012
| 84 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
4.8 Financial income and expenses
Accounting policies
The activity of the financial assets and liabilities and borrowings generates the financial income and expenses in Novo Nordisk. For 2012, ‘Share of profit or loss of associated companies’ has been reclassified as part of financial income, disclosed as ‘Income from other financial assets’. The net financials in the Income statement are mainly related to foreign exchange elements and can be specified as follows:
Financial income
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Interest income |
124
|
274
|
235
|
|||
| Foreign exchange gain (net) |
–
|
–
|
86
|
|||
| Foreign exchange gain on |
|
|||||
| derivatives (net) |
–
|
240
|
61
|
|||
| Income from other financial assets |
1
|
–
|
1,070
|
|||
|
|
|
|
|
|
|
|
| Total financial income |
125
|
514
|
1,452
|
|||
|
|
|
|
|
|
|
Financial expenses
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Interest expenses |
58
|
275
|
500
|
|||
| Foreign exchange loss (net) |
161
|
256
|
–
|
|||
| Forward contracts loss (net)1 |
39
|
1,276
|
2,049
|
|||
| Loss on currency options (net) |
147
|
200
|
82
|
|||
| Loss on investments etc. |
118
|
27
|
23
|
|||
| Other financial expenses |
83
|
99
|
46
|
|||
| Cash flow hedge transferred from | ||||||
| other comprehensive income (net)1 |
1,182
|
(1,170
|
)
|
(643
|
)
|
|
|
|
|
|
|
|
|
|
| Total financial expenses |
1,788
|
963
|
2,057
|
|||
|
|
|
|
|
|
|
| 1. | Comparative figures for 2011 and 2010 have been adjusted to align with the 2012 presentation. Total financial expenses are unchanged for 2011 and 2010. |
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
85
|
|
|
|
Section 5
Other disclosures
This section includes other statutory notes or notes that are of secondary importance for understanding the financial performance of Novo Nordisk. A list of subsidiaries in the Novo Nordisk Group is also included here.
5.1 Share-based payment schemes
Accounting policies
Share-based compensation
Novo Nordisk operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options or shares is recognised as an expense and allocated over the vesting period.
The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or shares granted, excluding the impact of any non-market vesting conditions. The fair value is fixed at the grant date. Non-market vesting conditions are included in assumptions about the number of options or shares that are expected to vest. At the end of each reporting period, Novo Nordisk revises its estimates of the number of options or shares that are expected to vest. Novo Nordisk recognises the impact of the revision of the original estimates, if any, in the Income statement and in a corresponding adjustment to Equity (change in proceeds) over the remaining vesting period. Adjustments relating to prior years are included in the Income statement in the year of adjustment.
Share-based payment
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Employee shares |
50
|
96
|
241
|
|||
| Long-term share-based incentive | ||||||
| programme (Senior Management Board) |
73
|
57
|
64
|
|||
| Long-term share-based incentive | ||||||
| programme and share options | ||||||
| (Management group below | ||||||
| Senior Management Board)1 |
185
|
166
|
158
|
|||
|
|
|
|
|
|
|
|
| Share-based payment expensed | ||||||
| in the Income statement |
308
|
319
|
463
|
|||
|
|
|
|
|
|
|
1. Includes long-term share-based incentive programme for 2007–2012.
Employee shares
In 2010, a general employee share programme was implemented in Denmark with exercise in the same year. Outside Denmark the programme was structured as share options with the same initial benefit per employee as in Denmark. The cost of the programme outside Denmark is amortised over the period 2010 –2013.
Long-term share-based incentive programme
For a description of the programme, please refer to ‘Remuneration’ in ‘Governance, leadership and shares’, pp 49 –51.
On 30 January 2013, the Board of Directors approved the establishment, for members of the Senior Management Board, of a joint pool for the financial year 2012 by allocating a total of 97,381 Novo Nordisk B shares. This allocation amounts on average to eight months’ fixed base salary plus pension contribution per participant, corresponding to a value at launch of the programme of DKK 73 million. This amount was expensed in 2012. The share price used for the conversion was the average share price (DKK 751) for Novo Nordisk B shares on NASDAQ OMX Copenhagen in the period 2–16 February 2012. Based on the split of participants when the joint pool was established, approximately 30% of the pool will be allocated to members of Executive Management and 70% to other members of the Senior Management Board.
The shares allocated to the joint pool for 2009 (177,066 shares), corresponding to a value at launch of the programme of DKK 54 million expensed in 2009, were released to the individual participants subsequent to the approval of the Annual Report 2012 by the Board of Directors and after the announcement of the 2012 full-year financial results on 31 January 2013.
For the management group below the Senior Management Board, a share-based incentive programme with similar performance criteria was introduced in 2007.
The shares allocated to the joint pool for 2009 (605,218 shares), corresponding to a value at launch of the programme of DKK 186 million amortised over the period 2009 –2012, were released to the individual participants subsequent to the approval of the Annual Report 2012 by the Board of Directors and after the announcement of the 2012 full-year financial results on 31 January 2013. The number of shares to be transferred (541,321) is lower than the original number of shares allocated to the share pool as some participants had left the company before the release conditions of the programme were met.
The total number of shares in the joint pools relating to the years 2010, 2011 and 2012 is as follows:
|
Number
|
Amount
|
||||||
|
Year
allocated to pool
|
of
shares
|
DKK
million
|
Vesting
|
||||
|
|
|
|
|
|
|
|
|
|
Senior
Management Board
|
|||||||
|
2010
|
168,576
|
64
|
2014
|
||||
|
2011
|
89,712
|
57
|
2015
|
||||
|
2012
|
97,381
|
73
|
2016
|
||||
|
|
|
|
|
|
|
|
|
|
355,669
|
|||||||
|
Management
group below
|
|||||||
|
Senior
Management Board
|
|||||||
|
2010
|
548,936
|
208
|
2014
|
||||
|
2011
|
297,133
|
188
|
2015
|
||||
|
2012
|
311,847
|
234
|
2016
|
||||
|
Cancelled
|
(35,428
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
1,122,488
|
|||||||
|
|
|
|
|
|
|
|
|
| Total |
1,478,157
|
||||||
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 86 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
5.1 Share-based payment schemes (continued)
Share options
Each option gives the right to purchase one Novo Nordisk B share. All share options are hedged by treasury shares. No ordinary share options have been granted since 2006 as the long-term incentive programme from 2007 onwards has been share-based.
The options are exercisable three years after the issue date and will expire after eight years. The exercise price for options granted based on performance targets for the financial years 2000 –2006 was equal to the market price of the Novo Nordisk B share at the time the plan was established. The options can only be settled in shares.
The internal rules for trading in Novo Nordisk securities by board members, executives and certain employees only permit trading in the 15-calendar-day period following each quarterly announcement.
Assumptions
The fair value of the Novo Nordisk B share options has been calculated using the Black-Scholes option-pricing model.
The expected volatility is calculated as one-year historical volatility (average of daily volatilities).
The assumptions used are shown in the table below:
|
2012
|
2011
|
2010
|
||||
|
|
|
|
|
|
|
|
| Expected life of the option in years | ||||||
| (average) |
1
|
2
|
4
|
|||
| Expected volatility |
21
|
%
|
23
|
%
|
21
|
%
|
| Expected dividend per share (in DKK) |
18.00
|
14.00
|
10.00
|
|||
| Risk-free interest rate | ||||||
| (based on Danish government bonds) |
0.00
|
%
|
0.20
|
%
|
2.00
|
%
|
| Novo Nordisk B share price | ||||||
| at the end of the year (in DKK) |
916.50
|
660
|
629
|
|||
|
|
|
|
|
|
|
|
Average
|
Calculated
|
|||||
|
exercise
price
|
fair
value
|
|||||
|
Share
|
per
option
|
per
option1
|
||||
| Outstanding share options in Novo Nordisk |
options
|
DKK
|
DKK
|
|||
|
|
|
|
|
|
|
|
| Outstanding at the end of 2010 |
3,436,894
|
110
|
498
|
|||
| Exercised in 2011 – ordinary share option plans |
(624,760
|
)
|
74
|
|||
| Exercised in 2011 – employee share options |
(506,300
|
)
|
||||
| Cancelled in 2011 |
(126,500
|
)
|
||||
|
|
|
|
|
|
|
|
| Outstanding at the end of 2011 |
2,179,334
|
153
|
504
|
|||
| Exercised in 2012 – ordinary share option plans |
(835,094
|
)
|
142
|
|||
| Exercised in 2012 – employee share options |
(1,150
|
)
|
||||
| Cancelled in 2012 |
(63,750
|
)
|
||||
| Employee share options – NNIT |
7,060
|
|||||
|
|
|
|
|
|
|
|
| Outstanding at the end of 2012 |
1,286,400
|
130
|
760
|
|||
|
|
|
|
|
|
|
1. The fair value has been calculated using the Black-Scholes model with the parameters existing at year-end of the respective year.
| Management’s share options | ||||||||
|
At
the
|
Exercised
|
|||||||
|
beginning
|
during
|
At
the end
|
Fair
value2
|
|||||
| Share options in Novo Nordisk |
of
the year
|
the
year
|
of
the year
|
DKK
million
|
||||
|
|
|
|
|
|
|
|
|
|
| Executive Management |
–
|
–
|
–
|
–
|
||||
| Other members of the Senior Management Board |
101,325
|
44,650
|
56,675
|
41
|
||||
|
|
|
|
|
|
|
|
|
|
| Total |
101,325
|
44,650
|
56,675
|
41
|
||||
|
|
|
|
|
|
|
|
|
2. The fair value has been calculated using the Black-Scholes model with the parameters existing at year-end of the respective year.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
87
|
|
|
|
5.1 Share-based payment schemes (continued)
Exercisable and outstanding share options in Novo Nordisk |
Issued
share
options
|
Exercised
share
options
|
Cancelled
|
Outstanding/
exercisable
share
options
|
Exercise
price
DKK
|
Exercise
period
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2004 Ordinary share option plan |
1,618,832
|
(1,430,166
|
)
|
(118,000
|
)
|
70,666
|
134
|
31/1/08
– 30/1/13
|
||||
| 2005 Ordinary share option plan |
1,640,468
|
(1,178,875
|
)
|
(159,368
|
)
|
302,225
|
153
|
31/1/09
– 30/1/14
|
||||
| 2006 Ordinary share option plan |
2,229,084
|
(1,406,782
|
)
|
(187,053
|
)
|
635,249
|
175
|
31/1/10
– 30/1/15
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable at the end of 2012 |
5,488,384
|
(4,015,823
|
)
|
(464,421
|
)
|
1,008,140
|
||||||
| 2010 Employee share options |
273,000
|
(1,800
|
)
|
–
|
271,200
|
0
|
1/12/13
|
|||||
| Employee share options – NNIT |
7,060
|
–
|
–
|
7,060
|
0
|
1/12/14
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at the end of 20123 |
5,768,444
|
(4,017,623
|
)
|
(464,421
|
)
|
1,286,400
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
3. All share options will vest if there is a change of control of Novo Nordisk A/S.
|
Average
|
Exercised
|
|||
|
market
price
|
share
|
|||
| Average market price of Novo Nordisk B shares per trading period in 2012 |
DKK
|
options
|
||
|
|
|
|
|
|
| 2 February – 16 February |
751
|
425,594
|
||
| 27 April – 11 May |
830
|
81,200
|
||
| 9 August – 23 August |
944
|
174,175
|
||
| 31 October – 14 November |
909
|
155,275
|
||
|
|
|
|
|
|
| Total exercised options |
836,244
|
|||
|
|
|
|
|
5.2 Management’s holdings of Novo Nordisk shares
The internal rules for trading in Novo Nordisk securities by board members, executives and certain employees only permit trading in the 15-calendar-day period following each quarterly announcement.
|
At
the beginning
of
the year
|
Additions
during
the year
|
Sold/transferred
during
the year
|
At
the end
of
the year
|
Market
value1
DKK
million
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Sten Scheibye |
800
|
800
|
0.7
|
|||||||
| Göran Ando |
1,600
|
500
|
2,100
|
1.9
|
||||||
| Bruno Angelici |
500
|
500
|
0.5
|
|||||||
| Henrik Gürtler |
–
|
–
|
–
|
|||||||
| Liz Hewitt |
–
|
400
|
400
|
0.4
|
||||||
| Ulrik Hjulmand-Lassen |
1,057
|
24
|
1,081
|
1.0
|
||||||
| Thomas Paul Koestler |
1,600
|
1,600
|
1.5
|
|||||||
| Anne Marie Kverneland |
2,475
|
24
|
(54
|
)
|
2,445
|
2.2
|
||||
| Kurt Anker Nielsen |
81,704
|
(3,300
|
)
|
78,404
|
71.8
|
|||||
| Søren Thuesen Pedersen |
324
|
24
|
(25
|
)
|
323
|
0.3
|
||||
| Hannu Ryöppönen |
2,250
|
2,250
|
2.1
|
|||||||
| Stig Strøbæk |
390
|
390
|
0.4
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Board of Directors in total |
92,700
|
972
|
(3,379
|
)
|
90,293
|
82.8
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
| Lars Rebien Sørensen |
54,970
|
15,578
|
(15,578
|
)
|
54,970
|
50.4
|
||||
| Jesper Brandgaard |
27,937
|
10,405
|
(4,700
|
)
|
33,642
|
30.8
|
||||
| Lise Kingo |
344
|
10,431
|
(5,381
|
)
|
5,394
|
4.9
|
||||
| Kåre Schultz |
51,217
|
10,405
|
(4,598
|
)
|
57,024
|
52.3
|
||||
| Mads Krogsgaard Thomsen |
48,605
|
10,548
|
(12,705
|
)
|
46,448
|
42.6
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management in total |
183,073
|
57,367
|
(42,962
|
)
|
197.478
|
181.0
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
| Other members of the Senior Management Board |
144,450
|
144,070
|
(108,957
|
)
|
179,563
|
164.5
|
||||
| Joint pool for Executive Management and | ||||||||||
| other members of the Senior Management Board2 |
567,012
|
97,381
|
(156,240
|
)
|
508,153
|
3
|
465.7
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
987,235
|
299,790
|
(311,538
|
)
|
975,487
|
894.0
|
||||
|
|
|
|
|
|
|
|
|
|
|
| 1. | Calculation of the market value is based on the quoted share price of DKK 916.50 at the end of the year. |
| 2. | The annual allocation to the joint pool is locked up for three years before it is transferred to the participants employed at the end of each three-year period. Based on the split of participants when the joint pool was established, approximately 30% of the pool will be allocated to the members of Executive Management and approximately 70% to other members of the Senior Management Board. In the lock-up period, the joint pool may potentially be reduced in the event of lower-than-planned value creation in subsequent years. |
| 3. | Excludes 24,582 shares currently assigned to three retired Senior Management Board members. |
NOVO NORDISK ANNUAL REPORT 2012
| 88 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
5.3 Adjustments for non-cash items
For the purpose of presenting the cash flow statement, non-cash items with effect on the Income statement must be reversed to identify the actual cash flow effect from the Income statement. The adjustments are specified as follows:
Adjustments for non-cash items
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Reversals of non-cash income statement items | ||||||
| Income taxes (note 2.4) |
6,379
|
4,828
|
3,883
|
|||
| Depreciation, amortisation and impairment losses (notes 3.1 and 3.2) |
2,693
|
2,737
|
2,467
|
|||
| Interest income and interest expenses, net (note 4.8) |
(66
|
)
|
1
|
265
|
||
| Share-based payment costs (note 5.1) |
308
|
319
|
463
|
|||
| Other financial income and expenses |
–
|
4
|
(1,070
|
)
|
||
| Changes in non-cash balance sheet items | ||||||
| Increase/(decrease) in provisions and retirement benefit obligations (notes 3.6 and 3.7) |
1,620
|
1,467
|
2,382
|
|||
| Of which remeasurement of retirement benefit obligations |
(281
|
)
|
–
|
–
|
||
| Other adjustments | ||||||
| (Gains)/losses from sale of property, plant and equipment |
21
|
(3
|
)
|
71
|
||
| Unrealised (gain)/loss from marketable securities |
43
|
28
|
(43
|
)
|
||
| Reclassification from working capital (other liabilities) |
739
|
–
|
–
|
|||
| Other, including unrealised exchange (gain)/loss etc. |
(203
|
)
|
(264
|
)
|
31
|
|
|
|
|
|
|
|
|
|
| Total adjustments for non-cash items |
11,253
|
9,117
|
8,449
|
|||
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
89
|
|
|
|
5.4 Commitments and contingencies
Commitments
The total contractual obligations and recognised non-current debt as at 31 December 2012 can be specified as follows:
Payments due by period
|
Less
|
More
|
|||||||||
|
than
|
1–3
|
3
–5
|
than
|
|||||||
| DKK million |
1
year
|
years
|
years
|
5
years
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Retirement benefit | ||||||||||
| obligations |
23
|
44
|
42
|
651
|
760
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total non-current | ||||||||||
| liabilities recognised | ||||||||||
| in the Balance sheet |
23
|
44
|
42
|
651
|
760
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Operating leases1 |
881
|
1,311
|
884
|
1,968
|
5,044
|
|||||
| Purchase obligations |
1,955
|
1,241
|
34
|
–
|
3,230
|
|||||
| Research and develop- | ||||||||||
| ment obligations |
1,506
|
1,218
|
191
|
–
|
2,915
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total obligations | ||||||||||
| not recognised in the | ||||||||||
| Balance sheet |
4,342
|
3,770
|
1,109
|
1,968
|
11,189
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total contractual | ||||||||||
| obligations |
4,365
|
3,814
|
1,151
|
2,619
|
11,949
|
|||||
|
|
|
|
|
|
|
|
|
|
|
As at 31 December 2011, the contractual obligations and recognised non-current debt can be specified as follows:
Payments due by period
|
Less
|
More
|
|||||||||
|
than
|
1–3
|
3
–5
|
than
|
|||||||
| DKK million |
1
year
|
years
|
years
|
5
years
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Loans |
–
|
97
|
99
|
306
|
502
|
|||||
| Retirement benefit | ||||||||||
| obligations |
13
|
26
|
24
|
376
|
439
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total non-current | ||||||||||
| liabilities recognised | ||||||||||
| in the Balance sheet |
13
|
123
|
123
|
682
|
941
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Interest payments | ||||||||||
| related to loans |
6
|
11
|
9
|
13
|
39
|
|||||
| Operating leases1 |
848
|
1,283
|
882
|
1,999
|
5,012
|
|||||
| Purchase obligations |
1,920
|
1,975
|
4
|
–
|
3,899
|
|||||
| Research and develop- | ||||||||||
| ment obligations |
1,241
|
1,448
|
85
|
–
|
2,774
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total obligations | ||||||||||
| not recognised in the | ||||||||||
| Balance sheet |
4,015
|
4,717
|
980
|
2,012
|
11,724
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total contractual | ||||||||||
| obligations |
4,028
|
4,840
|
1,103
|
2,694
|
12,665
|
|||||
|
|
|
|
|
|
|
|
|
|
|
1. No material finance lease obligations exist in 2012 and 2011.
The operating lease commitments are related to non-cancellable operating leases primarily related to premises, company cars and office equipment. Approximately 70% of the commitments are related to leases outside Denmark. The lease costs for 2012 and 2011 were DKK 1,100 million and DKK 1,059 million, respectively.
The purchase obligations primarily relate to contractual obligations in connection with investments in property, plant and equipment as well as purchase agreements regarding medical equipment and consumer goods. Novo Nordisk expects to fund these commitments with existing cash and cash flow from operations.
Research and development obligations entail uncertainties in relation to the period in which payments are due because a proportion of the obligations are dependent on milestone achievements. The due periods disclosed are based on Management’s best estimate. Novo Nordisk has engaged in research and development projects with a number of external enterprises. Most of these obligations relate to a post-approval study on the LEADER® programme.
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Other guarantees |
635
|
589
|
||
| Other guarantees primarily relate to guarantees | ||||
| issued by Novo Nordisk in relation to rented | ||||
| property | ||||
|
|
|
|
|
|
| Security for debt |
200
|
1,385
|
||
| Land, buildings and equipment etc. at carrying | ||||
| amount | ||||
|
|
|
|
|
World Diabetes Foundation
At the Annual General Meeting of Novo Nordisk A/S in 2002, the shareholders agreed on a donation to the World Diabetes Foundation (WDF), obligating Novo Nordisk A/S for a period of 10 years from 2001 to make annual donations to the Foundation of 0.25% of the net insulin sales of the Group in the preceding financial year.
At the Annual General Meeting in 2008, a new donation in addition to the existing obligation was agreed to by the shareholders. According to this agreement, Novo Nordisk is obliged to make annual donations to the Foundation of 0.01% in the period 2008 –2010 and 0.125% in the period 2011–2017 of the net insulin sales of the Group in the preceding financial year.
The annual donation in the period 2012–2017 will not exceed the lower of DKK 80 million or 15% of the taxable income of Novo Nordisk A/S in the financial year in question.
In 2012, the donation amounts to DKK 64 million (DKK 65 and 69 million in 2011 and 2010), which is recognised in Administrative costs in the Income statement. The 2012 donation includes an extra donation of DKK 11 million to support predetermined WDF activities (DKK 14 million in 2011).
Contingencies
Novo Nordisk is currently involved in pending litigations, claims and investigations arising out of the normal conduct of its business. While provisions that Management deems to be reasonable or appropriate have been made for probable losses, there are uncertainties connected with these estimates. Novo Nordisk does not expect the pending litigations, claims and investigations, individually and in the aggregate, to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow in addition to the amounts accrued.
See note 3.6 for the principles for accounting estimates and judgements about pending and potential future litigation outcomes.
NOVO NORDISK ANNUAL REPORT 2012
| 90 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
5.4 Commitments and contingencies (continued)
Pending litigation against Novo Nordisk
Along with a majority of the hormone therapy product manufacturers in the US, Novo Nordisk is a defendant in product liability lawsuits related to hormone therapy products. There are currently 38 cases against Novo Nordisk involving individuals who allege to have used a Novo Nordisk hormone therapy product. These products (Activella® and Vagifem® ) have been sold and marketed in the US since 2000. Until July 2003, the products were sold and marketed exclusively in the US by Pharmacia & Upjohn Company (now Pfizer Inc.). According to information received from Pfizer, 45 individuals (compared with 66 individuals in 2011) currently allege, in relation to similar lawsuits against Pfizer Inc., that they too have used a Novo Nordisk hormone therapy product. Novo Nordisk does not expect the pending claims to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow.
In November 2006, Novo Nordisk A/S and the Italian affiliate Novo Nordisk Farmaceutici S.p.A. were sued by A. Menarini Industrie Farmaceutiche Riunite s.r.l. and Laboratori Guidotti S.p.A. (‘Menarini’) in the Civil Court in Rome. Menarini claims that Novo Nordisk breached an alleged contract with Menarini for the sale and distribution of insulin and insulin analogues in the Italian market or, alternatively, has incurred a pre-contractual or extra-contractual liability arising from negotiations between the parties. Novo Nordisk disputes the claims made by Menarini. A hearing on the matter is scheduled to take place in July 2013. Novo Nordisk cannot predict how long the litigation will take or when it will be able to provide additional information. Novo Nordisk does not expect the pending claim to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow.
Novo Nordisk, along with 93 other defendants, has been named in a lawsuit filed in 2009 in the United States by the Republic of Iraq. The lawsuit alleges damages related to the defendants’ participation in the United Nations’ defunct Oil for Food Program. Nordisk does not expect the pending claim to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow.
In addition to the above, the Novo Nordisk Group is engaged in certain litigation proceedings. In the opinion of Management, settlement or continuation of these proceedings is not expected to have a material effect on Novo Nordisk’s financial position, operating profit or cash flow.
Pending claims against Novo Nordisk and investigations involving Novo Nordisk
In May 2009, Novo Nordisk entered into a Deferred Prosecution Agreement (DPA) for a three-year period with the US Department of Justice relating to certain actions undertaken by Novo Nordisk under the Oil For Food Programme for Iraq. Novo Nordisk had to comply with the terms of the DPA in order for the case to be dismissed. Novo Nordisk has subsequently enacted a detailed programme to ensure compliance with the DPA, including a reinforced governance structure, enhanced third-party due diligence systems and periodic testing of systems, policies and procedures. The DPA expired on 27 June 2012, and the U.S. District Court for the District of Columbia has dismissed the case. Accordingly, the DPA no longer imposes any obligations on Novo Nordisk.
In February 2011, the office of the US Attorney for the District of Massachusetts served Novo Nordisk with a subpoena calling for the production of documents regarding potential criminal offences relating to the company’s marketing and promotion practices for the following products: NovoLog® , Levemir® and Victoza® . This matter is now being conducted by the US Attorney for the District of Columbia. Novo Nordisk is cooperating with the US Attorney in this investigation. Novo Nordisk does not expect the pending claims to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow.
In June 2005 Novo Nordisk filed a patent infringement lawsuit against Caraco Pharmaceutical Laboratories, Ltd. (‘Caraco’), a generic pharmaceutical company, and its Indian parent, Sun Pharmaceutical Industries, Ltd., in the US District Court for the Eastern District of Michigan regarding Caraco’s abbreviated new drug application (‘ANDA’) for a generic version of Prandin® (repaglinide). In January 2011, the District Court ruled that Novo Nordisk’s US Patent No. 6,677,358 (the ‘358 patent’), which is directed toward the use of repaglinide in combination with metformin for the treatment of type 2 diabetes, is invalid and unenforceable. Novo Nordisk immediately appealed this decision on the merits to the US Court of Appeals for the Federal Circuit. Briefing in the appeal is completed; oral argument is expected to occur in Q1 2013, with a decision mid 2013.
Novo Nordisk is involved in patent infringement litigation with three additional ANDA applicants for generic versions of Prandin® : Paddock Laboratories, Aurobindo Pharma Ltd. and Sandoz Inc. The collateral estoppel decision in the Paddock case has been appealed to the Federal Circuit and will be taken up by the Federal Circuit as a companion case to the Caraco appeal, with oral argument following the Caraco oral argument. The collateral estoppel decision in the Aurobindo case has been appealed to the Federal Circuit and is stayed pending the Federal Circuit appeal of the decision on the merits in the Caraco case. Cases involving Sandoz in the US District Courts for the Eastern District of Michigan and New Jersey are stayed pending the Federal Circuit appeal of the decision on the merits in the Caraco case. Additionally, Novo Nordisk is involved in a patent infringement lawsuit with Lupin Ltd. in the US District Court for the Southern District of New York in which Novo Nordisk asserts that Lupin’s ANDA for a generic version of PrandiMet® (repaglinide/metformin HCl) infringes Novo Nordisk’s ‘358 patent’. This case is stayed pending the Federal Circuit appeal of the decision on the merits in the Caraco case.
Also pending before the District Court for the Eastern District of Michigan is a consolidated class action where a putative class of direct purchasers of Prandin® asserts that Novo Nordisk has violated US antitrust laws in delaying the entry of generic versions of Prandin® . This case is stayed pending the Federal Circuit appeal of the decision on the merits in the Caraco case.
At present, it is unclear whether or when a generic version of Prandin® or PrandiMet® will be available in the US market.
Novo Nordisk does not expect the pending claims related to Prandin® to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow.
In addition to the above, the Novo Nordisk Group is engaged in various ongoing tax audits and investigations. In the opinion of Management, these pending audits and investigations are not expected to have a material effect on Novo Nordisk’s financial position, operating profit or cash flow.
Disclosure regarding change of control
The EU Takeover Bids Directive, as partially implemented by the Danish Financial Statements Act, contains certain rules relating to listed companies on disclosure of information that may be of interest to the market and potential takeover bidders, in particular in relation to disclosure of change of control provisions.
For information on the ownership structure of Novo Nordisk, please refer to ‘Shares and capital structure’ on pp 44 – 45. For information on change of control clauses in share option programmes, please refer to note 5.1, ‘Share-based payment schemes’ and in relation to employee contracts for Executive Management of Novo Nordisk, please refer to ‘Remuneration’ pp 49 –51.
In addition, Novo Nordisk discloses that the Group does not have significant agreements to which the Group is a party and which take effect, alter or terminate upon a change of control of the Group following implementation of a takeover bid.
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
91
|
|
|
|
5.5 Related party transactions
Novo Nordisk A/S is controlled by Novo A/S (incorporated in Denmark), which owns 25.5% of the shares in Novo Nordisk A/S, representing 73.5% of the total number of votes, excluding treasury shares. The remaining shares are widely held. The ultimate parent of the Group is the Novo Nordisk Foundation (incorporated in Denmark). Both entities are considered related parties.
Other related parties are considered to be the Novozymes Group due to joint ownership, associated companies, the directors and officers of these entities, and Management of Novo Nordisk A/S.
In 2012, Novo Nordisk A/S acquired 5,100,000 B shares, worth DKK 4.2 billion, from Novo A/S as part of the DKK 12.0 billion share repurchase programme. The transaction price was DKK 823 per share and was calculated as the average market price from 27 April to 1 May 2012 in the open window following the announcement of the financial results for the first quarter of 2012.
In 2011, Novo Nordisk A/S acquired 5,100,000 B shares, worth DKK 2.9 billion, from Novo A/S as part of the DKK 12.0 billion share repurchase programme. The transaction price was DKK 571 per share and was calculated as the average market price from 4 to 10 August 2011 in the open window following the announcement of the financial results for the second quarter of 2011.
In 2010, Novo Nordisk A/S acquired 5,100,000 B shares, worth DKK 2.6 billion, from Novo A/S as part of the DKK 9.5 billion share repurchase programme. The transaction price was DKK 503 per share and was calculated as the average market price from 5 to 10 August 2010 in the open window following the announcement of the financial results for the second quarter of 2010.
The Group has had the following material transactions with related parties, (income)/expense:
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Novo Nordisk Foundation | ||||||
| Donations to Steno Diabetes | ||||||
| Center A/S via Novo Nordisk | (46 | ) | (45 | ) | (38 | ) |
| Novo A/S | ||||||
| Services provided by Novo Nordisk | (2 | ) | (2 | ) | (3 | ) |
| Purchase of Novo Nordisk B shares | 4,198 | 2,912 | 2,567 | |||
| Sale of treasury shares | ||||||
| (related to share options) | – | – | (2 | ) | ||
| Novozymes | ||||||
| Services provided by Novo Nordisk | (255 | ) | (268 | ) | (395 | ) |
| Services provided by Novozymes | 92 | 73 | 83 | |||
|
|
|
|
|
|
|
|
There have not been any material transactions with any director or officer of Novo Nordisk, Novozymes, Novo A/S, the Novo Nordisk Foundation or associated companies. For information on remuneration to the Management of Novo Nordisk, please refer to ‘Remuneration’ pp 49 –51, and note 2.3 ‘Employee costs’. There have not been and are no loans to the Board of Directors or Executive Management in 2012, 2011 or 2010.
There are no material unsettled transactions with related parties at the end of the year.
5.6 Licence fees and other operating income
Accounting policies
Licence fees and other
operating income comprise licence fees and income of a secondary nature in
relation to the main activities of Novo Nordisk. Non-Novo Nordisk-related
net profit from the two wholly owned subsidiaries NNIT A/S and NNE Pharmaplan
A/S is recognised as other operating income. Licence fees are recognised on
an accrual basis in accordance with the terms and substance of the relevant
agreement. Licence fees and other operating income also include income from
sale of intellectual property rights.
5.7 Fee to statutory auditors
|
DKK
million
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Statutory audit |
25
|
24
|
25
|
|||
| Audit-related services |
4
|
5
|
6
|
|||
| Tax advisory services |
12
|
13
|
15
|
|||
| Other services |
6
|
3
|
4
|
|||
|
|
|
|
|
|
|
|
| Total fee to statutory auditors | 47 | 45 | 50 | |||
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 92 | CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
5.8 Companies in the Novo Nordisk Group
|
Percentage
of
|
||||
|
Company
and country
|
shares
owned
|
Activity
|
||
|
|
|
|
|
|
| Parent company | ||||
| Novo Nordisk A/S, Denmark |
–
|
• • • •
|
||
| Subsidiaries by region | ||||
| Europe | ||||
| Novo Nordisk Pharma GmbH, Austria |
100
|
•
|
||
| SA Novo Nordisk Pharma NV, Belgium | 100 |
•
|
||
| Novo Nordisk Pharma d.o.o., Bosnia-Hercegovina | 100 |
•
|
||
| Novo Nordisk Pharma EAD, Bulgaria | 100 |
•
|
||
| Novo Nordisk Hrvatska d.o.o., Croatia | 100 |
•
|
||
| Novo Nordisk s.r.o., Czech Republic | 100 |
•
|
||
| FeF Chemicals A/S, Denmark | 100 |
•
•
|
||
| Novo Nordisk Region Europe A/S, Denmark | 100 |
•
|
||
| Steno Diabetes Center A/S, Denmark | 100 |
•
•
|
||
| Novo Nordisk Farma OY, Finland | 100 |
•
|
||
| Novo Nordisk, France | 100 |
•
|
||
| Novo Nordisk Production SAS, France | 100 |
•
|
||
| Novo Nordisk Pharma GmbH, Germany | 100 |
•
|
||
| Novo Nordisk Hellas Epe., Greece | 100 |
•
|
||
| Novo Nordisk Hungária Kft., Hungary | 100 |
•
|
||
| Novo Nordisk Limited, Ireland | 100 |
•
|
||
| Novo Nordisk S.P.A., Italy | 100 |
•
|
||
| UAB Novo Nordisk Pharma, Lithuania | 100 |
•
|
||
| Novo Nordisk Farma dooel, Macedonia | 100 |
•
|
||
| Novo Nordisk B.V., Netherlands | 100 |
•
|
||
| Novo Nordisk Scandinavia AS, Norway | 100 |
•
|
||
| Novo Nordisk Pharma Sp. z.o.o., Poland | 100 |
•
|
||
| Novo Nordisk Comércio Produtos Farmace˜uticos Lda., | 100 |
•
|
||
| Portugal | ||||
| Novo Nordisk Farma S.R.L., Romania |
100
|
•
|
||
| Novo Nordisk Pharma d.o.o. Belgrade (Serbia), Serbia |
100
|
•
|
||
| Novo Nordisk Slovakia s.r.o., Slovakia |
100
|
•
|
||
| Novo Nordisk, trz enje farmacevtskih izdelkov d.o.o., |
100
|
•
|
||
| Slovenia | ||||
| Novo Nordisk Pharma S.A., Spain | 100 |
•
|
||
| Novo Nordisk Scandinavia AB, Sweden | 100 |
•
|
||
| Novo Nordisk FemCare AG, Switzerland | 100 |
•
•
|
||
| Novo Nordisk Health Care AG, Switzerland | 100 |
•
•
|
||
| Novo Nordisk Pharma AG, Switzerland | 100 |
•
|
||
| Novo Nordisk Holding Limited, United Kingdom | 100 |
•
|
||
| Novo Nordisk Limited, United Kingdom | 100 |
•
|
||
| North America | ||||
| Novo Nordisk Canada Inc., Canada |
100
|
•
|
||
| Novo Nordisk Region North America II A/S, Denmark |
100
|
•
|
||
| Novo Nordisk US Holdings Inc., United States |
100
|
•
|
||
| Novo Nordisk Pharmaceutical Industries Inc., United States |
100
|
•
|
||
| Novo Nordisk Inc., United States |
100
|
• •
|
||
| Japan & Korea | ||||
| Novo Nordisk Region Japan & Korea A/S, Denmark | 100 |
•
|
||
| Novo Nordisk Pharma Ltd., Japan | 100 |
•
•
|
||
| Novo Nordisk Pharma Korea Ltd., South Korea | 100 |
•
|
|
Percentage
of
|
||||
|
Company
and country
|
shares
owned
|
Activity
|
||
|
|
|
|
|
|
| International Operations | ||||
| Aldaph SpA, Algeria |
100
|
•
•
|
||
| Novo Nordisk Pharma Argentina S.A., Argentina |
100
|
•
|
||
| Novo Nordisk Pharmaceuticals Pty. Ltd., Australia |
100
|
•
|
||
| Novo Nordisk Pharma (Private) Limited, Bangladesh |
100
|
•
|
||
| Novo Nordisk Produção Farmacêutica do Brasil Ltda., |
100
|
•
|
||
| Brazil | ||||
| Novo Nordisk Farmacêutica do Brasil Ltda., Brazil |
100
|
•
|
||
| Novo Nordisk Farmacêutica Limitada, Chile |
100
|
•
|
||
| Novo Nordisk Pharma Operations A/S, Denmark |
100
|
•
|
||
| Novo Nordisk Region International Operations A/S, |
100
|
•
|
||
| Denmark | ||||
| Novo Nordisk Egypt LLC, Egypt |
100
|
•
|
||
| Novo Nordisk India Private Limited, India |
100
|
•
•
|
||
| Novo Nordisk Service Centre (India) Pvt. Ltd., India |
100
|
•
|
||
| PT. Novo Nordisk Indonesia, Indonesia |
100
|
•
|
||
| Novo Nordisk Pars, Iran |
100
|
•
|
||
| Novo Nordisk Ltd, Israel |
100
|
•
|
||
| Novo Nordisk Pharma SARL, Lebanon |
100
|
•
|
||
| Novo Nordisk Pharma (Malaysia) Sdn Bhd, Malaysia |
100
|
•
|
||
| Novo Nordisk Pharma Operations (BAOS) Sdn Bhd, |
100
|
•
|
||
| Malaysia | ||||
| Novo Nordisk Mexico S.A. de C.V., Mexico |
100
|
•
|
||
| Novo Nordisk Servicios Profesionales S.A. de C.V., Mexico |
100
|
•
|
• | |
| Novo Nordisk Farmacéutica S.A. de C.V., Mexico |
100
|
•
|
||
| Novo Nordisk Pharma SAS, Morocco |
100
|
•
|
||
| Novo Nordisk Pharmaceuticals Ltd., New Zealand |
100
|
•
|
||
| Novo Nordisk Pharma Limited, Nigeria |
100
|
•
|
||
| Novo Nordisk Pharma (Private) Limited, Pakistan |
100
|
•
|
||
| Novo Nordisk Pharmaceuticals (Philippines) Inc., |
100
|
•
|
||
| Philippines | ||||
| Novo Nordisk Limited Liability Company, Russia |
100
|
•
|
||
| Novo Nordisk Production Support LLC, Russia |
100
|
•
|
||
| Novo Investment Pte Limited, Singapore |
100
|
•
|
||
| Novo Nordisk Pharma (Singapore) Pte Ltd., Singapore |
100
|
•
|
||
| Novo Nordisk (Pty) Limited, South Africa |
100
|
•
|
||
| Novo Nordisk Pharma (Thailand) Ltd., Thailand |
49
|
•
|
||
| Novo Nordisk Tunisie SARL, Tunisia |
100
|
•
|
||
| Novo Nordisk Saglik Ürünleri Tic. Ltd. Sti., Turkey |
100
|
•
|
||
| Novo Nordisk Pharma Gulf FZ-LLC, United Arab Emirates |
100
|
•
|
||
| Novo Nordisk Venezuela Casa de Representación C.A., |
100
|
•
|
||
| Venezuela | ||||
| Region China | ||||
| Novo Nordisk (China) Pharmaceuticals Co., Ltd., China |
100
|
•
•
|
||
| Beijing Novo Nordisk Pharmaceuticals Science & |
100
|
•
|
||
| Technology Co., Ltd., China | ||||
| Novo Nordisk Region China A/S, Denmark |
100
|
•
|
||
| Novo Nordisk Hong Kong Limited, Hong Kong |
100
|
•
|
||
| Novo Nordisk Pharma (Taiwan) Ltd., Taiwan |
100
|
•
|
||
| Other subsidiaries | ||||
| NNIT A/S1 , Denmark |
100
|
•
|
||
| NNE Pharmaplan A/S1 , Denmark |
100
|
•
|
||
|
|
|
|
|
|
| 1. | In addition to the listed companies, NNIT A/S and NNE Pharmaplan A/S have their own subsidiaries. |
| Activity: • Production • Sales and marketing • Research and development • Services / investments |
|
NOVO NORDISK ANNUAL REPORT 2012
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
93
|
|
|
|
5.9 Financial definitions
ADRs
An American Depositary
Receipt (or ADR) represents ownership in the shares of a non-US company and
trades in US financial markets.
Basic earnings per
share (EPS)
Net profit divided by the
average number of shares outstanding.
Diluted earnings
per share
Net profit divided by average
number of shares outstanding, including the dilutive effect of share options
‘in the money’. The dilutive effect of share options ‘in the
money’ is calculated as the difference between the following:
1) the number of shares
that could have been acquired at fair value with proceeds from the exercise
of the share options
2) the number of
shares that would have been issued assuming the exercise of the share options.
The difference (the dilutive effect) is added to the denominator as an issue of shares for no consideration.
Effective tax rate
Income taxes as a percentage
of profit before income taxes.
Equity ratio
Total equity at year-end
as a percentage of total assets at year-end.
Gross margin
Gross profit as a percentage
of sales.
Net profit margin
Net profit as a percentage
of sales.
Number of shares
outstanding
The total number of shares,
excluding the holding of treasury shares.
Operating profit
margin
Operating profit as a percentage
of sales.
Other comprehensive
income (OCI)
Other comprehensive income
comprises all items recognised in Equity for the year other than those related
to transactions with owners of the company. Examples of items that are required
to be presented in OCI are:
| • | Foreign exchange rate adjustments in foreign subsidiaries |
| • | Actuarial gains and losses arising on defined benefit plans |
| • | Changes in fair value of financial instruments in a cash flow hedge. |
Payout ratio
Total dividends for the
year as a percentage of net profit.
Return on equity
(ROE)
Net profit for the year
as a percentage of shareholders’ equity (average).
Non-IFRS financial
measures
In the Annual Report, Novo
Nordisk discloses certain financial measures of the Group’s financial
performance, financial position and cash flows that reflect adjustments to
the most directly comparable measures calculated and presented in accordance
with IFRS. These non-IFRS financial measures may not be defined and calculated
by other companies in the same manner, and may thus not be comparable with
such measures.
The non-IFRS financial measures presented in the Annual Report are:
| • | Cash to earnings |
| • | Financial resources at the end of the year |
| • | Free cash flow |
| • | Operating profit after tax to net operating assets |
| • | Underlying sales growth in local currencies. |
Cash to earnings
Cash to earnings is defined as ‘free cash flow as a percentage of net
profit’.
Financial resources
at the end of the year
Financial resources at the end of the year is defined as the sum of cash and
cash equivalents at the end of the year, bonds with original term to maturity
exceeding three months and undrawn committed credit facilities.
Free cash flow
Novo Nordisk defines free cash flow as ‘net cash generated from operating
activities less net cash used in investing activities’ excluding ‘Net
change in marketable securities’.
Operating profit
after tax to net operating assets (OPAT/NOA)
Operating profit after
tax to net operating assets is defined as ‘operating profit after tax
(using the effective tax rate) as a percentage of average inventories, receivables,
property, plant and equipment, intangible assets and deferred tax assets less
non-interest-bearing liabilities including provisions and deferred tax liabilities
(where average is the sum of the above assets and liabilities at the beginning
of the year and at year-end divided by two)’.
Underlying sales
growth in local currencies
Underlying sales growth
in local currencies is defined as sales for the year measured at prior year
average exchange rates compared with sales for prior year measured at prior
year average exchange rates.
NOVO NORDISK ANNUAL REPORT 2012
| 94 | QUARTERLY FINANCIAL FIGURES 2011 AND 2012 |
Part
of Management's review
|
|
|
||
Quarterly financial figures 2011 and 2012
|
2011
|
2012
|
|||||||||||||||
| DKK million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales | 15,693 | 16,001 | 16,532 | 18,120 | 17,751 | 19,468 | 19,845 | 20,962 | ||||||||
| Sales by business segment: | ||||||||||||||||
| Modern insulins (insulin analogues) | 6,705 | 6,972 | 7,232 | 7,856 | 7,867 | 8,613 | 8,879 | 9,462 | ||||||||
| Human insulins | 2,655 | 2,642 | 2,698 | 2,790 | 2,718 | 2,781 | 2,794 | 3,009 | ||||||||
| Victoza® | 1,098 | 1,250 | 1,547 | 2,096 | 1,990 | 2,293 | 2,503 | 2,709 | ||||||||
| Protein-related products | 639 | 527 | 574 | 569 | 625 | 621 | 644 | 621 | ||||||||
| Oral antidiabetic products (OAD) | 711 | 653 | 562 | 649 | 716 | 653 | 719 | 670 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diabetes care total | 11,808 | 12,044 | 12,613 | 13,960 | 13,916 | 14,961 | 15,539 | 16,471 | ||||||||
| NovoSeven® | 2,032 | 2,140 | 2,044 | 2,131 | 1,909 | 2,451 | 2,153 | 2,420 | ||||||||
| Norditropin® | 1,252 | 1,180 | 1,275 | 1,340 | 1,346 | 1,440 | 1,451 | 1,461 | ||||||||
| Hormone replacement therapy | 492 | 513 | 501 | 548 | 500 | 530 | 600 | 533 | ||||||||
| Other products | 109 | 124 | 99 | 141 | 80 | 86 | 102 | 77 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Biopharmaceuticals total | 3,885 | 3,957 | 3,919 | 4,160 | 3,835 | 4,507 | 4,306 | 4,491 | ||||||||
| Sales by geographical segment: | ||||||||||||||||
| North America | 6,035 | 6,165 | 6,804 | 7,582 | 7,324 | 8,356 | 8,981 | 9,559 | ||||||||
| Europe | 4,595 | 4,847 | 4,728 | 4,998 | 4,596 | 5,081 | 4,793 | 5,237 | ||||||||
| International Operations | 2,203 | 2,415 | 2,286 | 2,463 | 2,734 | 2,757 | 2,695 | 2,894 | ||||||||
| Japan & Korea | 1,484 | 1,423 | 1,539 | 1,777 | 1,485 | 1,724 | 1,710 | 1,698 | ||||||||
| Region China | 1,376 | 1,151 | 1,175 | 1,300 | 1,612 | 1,550 | 1,666 | 1,574 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit | 12,576 | 12,902 | 13,281 | 14,998 | 14,348 | 16,044 | 16,360 | 17,809 | ||||||||
| Sales and distribution costs | 4,260 | 4,633 | 4,724 | 5,387 | 4,850 | 5,203 | 5,299 | 6,192 | ||||||||
| Research and development costs | 2,290 | 2,323 | 2,263 | 2,752 | 2,507 | 2,563 | 2,617 | 3,210 | ||||||||
| Administrative costs | 756 | 778 | 788 | 923 | 776 | 779 | 766 | 991 | ||||||||
| Licence fees and other operating income (net) | 148 | 97 | 104 | 145 | 170 | 154 | 186 | 156 | ||||||||
| Operating profit | 5,418 | 5,265 | 5,610 | 6,081 | 6,385 | 7,653 | 7,864 | 7,572 | ||||||||
| Net financials | (128 | ) | 103 | (154 | ) | (270 | ) | (328 | ) | (710 | ) | (505 | ) | (120 | ) | |
| Profit before income taxes | 5,290 | 5,368 | 5,456 | 5,811 | 6,057 | 6,943 | 7,359 | 7,452 | ||||||||
| Income taxes | 1,217 | 1,234 | 1,255 | 1,122 | 1,393 | 1,597 | 1,692 | 1,697 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net profit | 4,073 | 4,134 | 4,201 | 4,689 | 4,664 | 5,346 | 5,667 | 5,755 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation, amortisation and impairment losses | 605 | 825 | 615 | 692 | 638 | 656 | 644 | 755 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets | 59,001 | 61,528 | 62,013 | 64,698 | 61,210 | 60,978 | 66,620 | 65,669 | ||||||||
| Total equity | 34,768 | 36,966 | 35,428 | 37,448 | 32,358 | 31,334 | 35,660 | 40,632 | ||||||||
|
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|
|
Financial ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As percentage of sales | ||||||||||||||||
| Sales and distribution costs | 27.1% | 29.0% | 28.6% | 29.7% | 27.3% | 26.7% | 26.7% | 29.5% | ||||||||
| Research and development costs | 14.6% | 14.5% | 13.7% | 15.2% | 14.1% | 13.2% | 13.2% | 15.3% | ||||||||
| Administrative costs | 4.8% | 4.9% | 4.8% | 5.1% | 4.4% | 4.0% | 3.9% | 4.7% | ||||||||
| Gross margin1 | 80.1% | 80.6% | 80.3% | 82.8% | 80.8% | 82.4% | 82.4% | 85.0% | ||||||||
| Operating profit margin1 | 34.5 | 32.9% | 33.9% | 33.6% | 36.0% | 39.3% | 39.6% | 36.1% | ||||||||
| Equity ratio1 | 58.9% | 60.1% | 57.1% | 57.9% | 52.9% | 51.4% | 53.5% | 61.9% | ||||||||
|
|
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|
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|
Share ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share/ADR (in DKK) | 7.13 | 7.26 | 7.45 | 8.40 | 8.38 | 9.72 | 10.40 | 10.59 | ||||||||
| Diluted earnings per share/ADR (in DKK) | 7.06 | 7.21 | 7.39 | 8.33 | 8.32 | 9.67 | 10.33 | 10.53 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average number of shares outstanding (million) – basic | 571.6 | 569.1 | 563.5 | 557.6 | 556.7 | 549.1 | 544.6 | 542.9 | ||||||||
| Average number of shares outstanding (million) – diluted | 576.7 | 573.8 | 568.1 | 561.9 | 560.5 | 552.4 | 547.8 | 546.0 | ||||||||
|
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|
|
Employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of full-time employees at the end of the period | 30,867 | 31,549 | 32,016 | 32,136 | 32,252 | 32,819 | 33,501 | 34,286 | ||||||||
|
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|
1. For definitions, please refer to p 93.
NOVO NORDISK ANNUAL REPORT 2012
|
Supplementary
information
|
CONSOLIDATED
SOCIAL STATEMENT
|
95
|
|
|
||
Statement of social performance for the year ended 31 December
|
Note
|
2012
|
2011
|
2010
|
|||||
|
|
|
|
|
|
||||
| Patients | ||||||||
| Patients reached with diabetes care products (million) (estimate) |
2.1
|
23 | 21 |
N/A
|
||||
| Healthcare professionals trained or educated in diabetes (1,000) |
2.2
|
1,274 | 835 | 373 | ||||
| People with diabetes trained (1,000) |
2.2
|
836 | 626 | 494 | ||||
| Least developed countries where Novo Nordisk sells insulin according | ||||||||
| to the differential pricing policy |
2.3
|
35 | 36 | 33 | ||||
| Donations to the World Diabetes Foundation (DKK million) | 64 | 65 | 69 | |||||
| Donations to the Novo Nordisk Haemophilia Foundation (DKK million) | 20 | 16 | 15 | |||||
| People participating in clinical trials |
2.4
|
23,018 | 22,445 | 19,361 | ||||
| Animals purchased for research |
2.5
|
73,601 | 66,401 | 62,927 | ||||
| New patent families (first filings) |
2.6
|
65 | 80 | 62 | ||||
| Employees | ||||||||
| Employees (total) |
3.1
|
34,731 | 32,632 | 30,483 | ||||
| Employees (average FTEs) | 33,061 | 31,499 | 29,423 | |||||
| Employee turnover |
3.1
|
9.1% | 9.8% | 9.1% | ||||
| Working the Novo Nordisk Way (employee assessment) (scale 1– 5) | 4.3 | 4.3 |
N/A
|
|||||
| Diverse senior management teams |
3.1
|
66% | 62% | 54% | ||||
| Annual training costs per employee (DKK) | 9,951 | 10,479 | 14,207 | |||||
| Frequency of occupational injuries (number/million working hours) |
3.2
|
3.2 | 3.4 | 4.9 | ||||
| Absence |
3.2
|
2.2% | 2.3% | 2.5% | ||||
| Employment impact worldwide (direct and indirect) |
3.3
|
125,600 | 118,700 | 108,200 | ||||
| Assurance | ||||||||
| Relevant employees trained in business ethics | 99% | 99% | 98% | |||||
| Business ethics assurance activities | 48 | 46 | 35 | |||||
| Fulfilment of action points from facilitations of the Novo Nordisk Way | 94% | 93% | 93% | |||||
| Supplier audits |
4.1
|
219 | 177 | 192 | ||||
| Product recalls |
4.2
|
6 | 5 | 5 | ||||
| Warning Letters and re-inspections |
4.3
|
1 | 0 | 0 | ||||
| Company reputation with external key stakeholders (scale 1–7) | 5.7 | 5.6 |
N/A
|
|||||
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 96 | CONSOLIDATED SOCIAL STATEMENT |
Supplementary
information
|
|
|
||
As described in the introduction to the financial statements (see p 60), the notes have been reorganised into sections.
In the Consolidated social statement, Novo Nordisk reports on three dimensions of performance – ‘patients’, ‘employees’ and ‘assurance’ – and on progress on the long-term targets to reach more patients with diabetes care products, ensure that the organisation is working the Novo Nordisk Way and nurture a diverse working environment.
Sections in the Consolidated social statement
Section 1 ‘Basis
of preparation’
Introduces the social accounting
policies and standards used for reporting on social performance.
Basis of preparation, p 96
Section 2 ‘Patients’
Covers the disclosures
related to efforts to improve availability, accessibility, affordability and
quality of care through discovery, development and dissemination of medical
treatments and capacity building.
| 2.1 | Patients reached with diabetes care products, p 98 |
| 2.2 | Healthcare professionals trained or educated in diabetes and people with diabetes trained, p 98 |
| 2.3 | Least developed countries where Novo Nordisk sells insulin according to the differential pricing policy, p 98 |
| 2.4 | People participating in clinical trials, p 98 |
| 2.5 | Animals purchased for research, p 98 |
| 2.6 | New patent families (first filings), p 99 |
Section 3 ‘Employees’
Covers the social responsibility
towards employees, ie offering a healthy and engaging working environment,
which lays the foundation for realisation of the company’s vision and
strategic objectives.
| 3.1 | Employees, p 99 |
| 3.2 | Frequency of occupational injuries and absence, p 99 |
| 3.3 | Employment impact (direct and indirect), p 100 |
Section 4 ‘Assurance’
Covers management processes
put in place to ensure that business practices meet requirements and company
standards for ethical performance, which is a precondition for earning stakeholder
confidence and trust.
| 4.1 | Supplier audits, p 100 |
| 4.2 | Product recalls, p 100 |
| 4.3 | Warning Letters and re-inspections, p 100 |
Section 1 Basis of preparation
General reporting
standards and principles
The Consolidated
social statement is prepared in accordance with the Danish Financial Statements
Act (FSA), section 99a. Section 99a requires Novo Nordisk to account for the
company’s activities relating to social responsibility, reporting on
business strategies and activities in the areas of human rights, labour standards,
environment, anti-corruption, and climate. Companies that subscribe to the
UN Global Compact and annually submit their Communication on Progress will
be in compliance with the FSA, provided that the annual report includes a
reference to where the information has been made publicly available. Novo
Nordisk’s Communication on Progress 2012 can be found at novonordisk.com/annualreport
and on UN Global Compact’s website at unglobalcompact.org/COP.
Novo Nordisk adheres to the following internationally recognised voluntary reporting standards and principles (for reporting overview, see p 112):
| • | AA1000 framework for accountability. The framework(AA1000APS(2008) and AA1000AS(2008)) states that reporting must provide a complete, accurate, relevant and balanced picture of the organisation’s approach to and impact on society. Novo Nordisk’s assurance process is designed according to AA1000AS(2008). |
| • | UN Global Compact. As a signatory to the UN Global Compact, a strategic policy initiative for businesses that are committed to align their operations and strategies with 10 universally accepted principles in the areas of human rights, labour, environment and anti-corruption, Novo Nordisk reports on progress during 2012 in the Communication on Progress, which can be found at novonordisk.com/annualreport. As a member of UN Global Compact LEAD, a platform for a select group of companies to drive leadership to the next generation of sustainability performance, Novo Nordisk demonstrates the sustainability governance and management processes through the Blueprint for Corporate Sustainability Leadership, which is also part of the Communication on Progress. |
| • | Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines. The guidelines (G3) include an internationally recognised set of indicators for economic, environmental and social aspects of business performance that enables stakeholders to compare companies’ performance. Novo Nordisk’s reporting according to the reporting principles and guidance, including required disclosures, can be found at novonordisk.com/annualreport. |
In addition, Novo Nordisk reports with reference to the content elements and guiding principles of the International Integrated Reporting Framework being developed by the International Integrated Reporting Committee. The draft framework is currently being piloted by a group of companies, including Novo Nordisk.
To Novo Nordisk, AA1000APS(2008) is a component in creating a generally applicable approach to assessing and strengthening the credibility of the Group’s public reporting of social and environmental data. Novo Nordisk’s assurance process has been designed to ensure that the qualitative and quantitative information that documents the social and environmental dimensions of performance as well as the systems that underpin the data and performance are assured. The principles outlined in AA1000APS(2008) have been applied as described below.
Inclusivity
As a pharmaceutical business
with global reach, Novo Nordisk is committed to being accountable to those
stakeholders that are impacted by the organisation. Novo Nordisk maps its
stakeholders and has processes in place to ensure inclusion of stakeholder
concerns and expectations. In addition, Novo Nordisk continuously develops
its stakeholder engagement and sustainability capacity at corporate and affiliate
levels. Stakeholder engagement results in stakeholders being involved in developing
and accounting for strategic responses to sustainability challenges.
NOVO NORDISK ANNUAL REPORT 2012
|
Supplementary
information
|
CONSOLIDATED
SOCIAL STATEMENT
|
97
|
|
|
||
Materiality
Key issues are identified
through ongoing stakeholder engagement and trendspotting and are addressed by
programmes or action plans with clear and measurable targets. Long-term targets
are set to guide long-term performance in strategic areas. The issues presented
in the annual report are deemed to have a significant impact on the Group’s
future business performance and may support stakeholders in their decision-making,
and are therefore regarded as Novo Nordisk’s material issues.
Responsiveness
The report reaches out
to a wide range of stakeholders, each with their specific needs and interests.
To most stakeholders, however, the annual report is just one element of interaction
and communication with the company. The annual report reflects how the company
is managing operations in ways that respond to and consider stakeholder concerns
and interests.
Defining materiality
It is Novo Nordisk’s
responsibility to ensure that those areas in which the company has significant
impact are addressed. Issues for the social and environmental reporting are
prioritised, and what is included in the printed annual report are the issues
considered most material.
In assessing which information to include in the annual report, legal requirements and disclosure commitments made by Novo Nordisk are considered. Furthermore, it is assessed whether information is tied directly or indirectly to Novo Nordisk’s ability to create value. Short- and long-term value creation is taken into consideration.
The outcomes of formal reviews, research, stakeholder engagement and internal materiality discussions are presented as a proposal for annual reporting to Executive Management and the Board of Directors.
The conclusion from the external assurance provider is available in the Independent assurance report on p 111.
Principles of consolidation
The Consolidated social
statement and disclosures cover Novo Nordisk A/S and entities controlled by
Novo Nordisk A/S.
Social accounting policies
The accounting policies set out below and in the notes have been applied consistently in the preparation of the Consolidated social statement for all the years presented, with the following exception due to changes in the accounting policy.
Change in accounting
policies
The disclosure ‘People
with diabetes using Novo Nordisk injectable products’ has been renamed
‘Patients reached with diabetes care products’ and has been expanded
to include all diabetes care products, except devices and PrandiMet®
,
for which there is no WHO-defined dose. The exclusion of PrandiMet®
is estimated to be immaterial in terms of impact on the total number reached
because volumes sold are limited. Furthermore, the disclosure was previously
calculated by reconciling Novo Nordisk’s annual sales volume by product,
annual product consumption per patient following different treatment regimens
and recommended country-specific daily dose, and the total number of patients
in the market by treatment regime. From this year, the number will be calculated
using the volume sold divided by the WHO average annual usage dose per patient.
This is being done to enhance transparency. Historical data have been restated
to reflect this change.
Please refer to the accounting policies stated below and in the notes for further information on the social disclosures.
New disclosures
The following disclosures
have been added to align with management priorities:
| • | ‘Working the Novo Nordisk Way (employee assessment)’, which replaces ‘Engagement rate (employee engagement)’ |
| • | ‘Business ethics assurance activities’ |
Other accounting policies
Donations to the
World Diabetes Foundation
Donations by Novo Nordisk
to the World Diabetes Foundation are recognised as an expense when the donation
is paid out or when an unconditional commitment to donate has been granted.
For additional information, please refer to note 5.4 in the Consolidated financial
statement.
Donations to the
Novo Nordisk Haemophilia Foundation
Donations by Novo Nordisk
to the Novo Nordisk Haemophilia Foundation are recognised as an expense when
the donation is paid out or when an unconditional commitment to donate has
been granted.
Working the Novo
Nordisk Way (employee assessment)
Working the Novo Nordisk
Way (employee assessment) is measured on a scale of 1– 5, with 5 being
the best, and is a simple average of respondents’ answers to all mandatory
questions in the annual employee survey, eVoice, covering the Novo Nordisk
Way. For 2012, the eVoice response rate was 91% compared with 92% in 2011.
Annual training
costs per employee
Training costs cover internal
and external training posted in the financial accounts, calculated per employee.
Relevant employees
trained in business ethics
The business ethics training
is based on globally applicable Standard Operating Procedures (SOPs) released
by the Business Ethics Compliance Office annually. The target groups for the
individual SOPs vary in size but cover all employees present in Novo Nordisk
at the time of the new releases except employees on leave, student assistants,
PhDs and post docs.
The percentage of employees
completing the training is calculated as the average percentage of completion
of the SOPs. The calculation of the percentage of employees trained in business
ethics is based on registrations in training databases and local archives
of employees completing the relevant annual business ethics training.
Business ethics
assurance activities
The number of business
ethics assurance activities is recorded as the number of conducted business
ethics reviews in affiliates, production sites and headquarter areas. Furthermore,
the number includes other business ethics assurance activities such as design
reviews, trend reports and review of third parties.
Fulfilment of action
points from facilitations of the Novo Nordisk Way
For 2012 and 2011, the
percentage of fulfilment of action points arising from facilitations, or values
audits, of the Novo Nordisk Way is measured as an average of timely closure
of action points issued in the current year and the two previous years. The
reason for using a three-year average as the basis for the calculation is
that action lead times typically vary from a couple of months to more than
a year. For 2010, the closure of action points is based on the Novo Nordisk
Way of Management.
Company reputation
with external key stakeholders
Company reputation with
external key stakeholders is measured as the mean corporate brand score in
the top seven markets (the US, Canada, China, Japan, Germany, the UK and France)
weighted in accordance with actual sales of diabetes products (excluding oral
antidiabetic products). The mean corporate brand score is based on company
ratings (on a scale of 1–7, with 7 being the best) collected through
interviews with primary and secondary healthcare professionals who are current
prescribers of Novo Nordisk injectable diabetes products. Each market is surveyed
every second year, so the score is based on a two-year rolling average. The
survey is carried out by an independent external consultancy firm.
NOVO NORDISK ANNUAL REPORT 2012
| 98 | CONSOLIDATED SOCIAL STATEMENT |
Supplementary
information
|
|
|
||
Section 2 Patients
2.1 Patients reached with diabetes care products (million) (estimate)
Accounting policies
Patients reached with diabetes
care products, except devices and PrandiMet®
,
is estimated by dividing Novo Nordisk’s annual sales volume by the annual
usage dose per patient for each product class as defined by the WHO. PrandiMet®
is not included as no WHO-defined dosage exists.
Development
The estimated number of
patients increased by 10% from 21 million in 2011 to 23 million in 2012. This
development is driven by increasing sales of insulin products (modern insulins
and human insulin), particularly in International Operations, China and North
America. The strong penetration of Victoza®
in mature markets contributed by around 1 percentage point.
2.2 Healthcare professionals trained or educated in diabetes and people with diabetes trained
Accounting policies
Healthcare professionals
(HCPs) trained or educated in diabetes is measured as an estimate based on registrations
by affiliates and corporate functions at Novo Nordisk. The number reflects the
total number of healthcare professionals participating in Novo Nordisk-sponsored
face-to-face and online training and education activities during the year.
People with diabetes trained is measured as an estimate based on registra tions by affiliates and corporate functions in Novo Nordisk. The number reflects the total number of people with diabetes with whom Novo Nordisk has engaged during the year for educational purposes. Training is re cognised as activities conducted, organised or funded by Novo Nordisk.
Development
Training of HCPs and patients
increased by 53% and 34% respectively compared with last year. The significant
increases in training are due to increased activities in several markets and
particularly in the US.
2.3 Least developed countries where Novo Nordisk sells insulin according to the differential pricing policy
Accounting policies
Novo Nordisk has formulated
a differential pricing policy for the least developed countries (LDCs) as defined
by the UN. The differential pricing policy is part of the global initiative
to promote access to health for all LDCs as defined by the UN. The purpose of
the policy is to offer human insulin in vials to all LDCs at or below a price
of 20% of the average prices for human insulin in vials in the western world.
The western world is defined as Europe (the EU, Switzerland and Norway), the
United States, Canada and Japan. The number of LDCs where Novo Nordisk sells
human insulin in vials according to the differential pricing policy is measured
by direct or indirect sales by Novo Nordisk via government tender or private
market sales to wholesalers, distributors or non-governmental organisations.
Historically the number has been reported as a percentage of the total number
of LDCs, but will from this year on be reported as the actual number of countries
in which the differential price has been accepted. In 2012 and 2010, 49 countries
were on the UN LDC list, against 48 in 2011.
Development
In 2012, Novo Nordisk offered
the differential price to all 49 LDCs. Novo Nordisk operates in 37 of these
countries and sold insulin to either governments or the private market in 35
countries according to the differential pricing policy, compared with 36 countries
in 2011. Novo Nordisk operated in Malawi and Laos but did not sell insulin at
the differential price. The governments in these two countries were offered
the opportunity to buy insulin at the differential price but the insulin sold
here in 2012 was sold to the private market. The total volume of insulin sold
increased by 30% compared with 2011.
In 12 LDCs, Novo Nordisk had no sales in 2012 for various reasons. In several cases, the government did not respond to the offer, there were no private wholesalers or other partners to work with, or war or political unrest made it impossible to do business. While Novo Nordisk prefers to sell insulin at the differential price through government tenders, the company is willing to sell to private distributors and agents. Novo Nordisk is unable to guarantee that the price at which the company sells the insulin will be reflected in the final price to the consumer.
2.4 People participating in clinical trials
Accounting policies
The number of people participating
in clinical research (phase 1– 4, excluding observational studies) is recorded
as active participants in clinical research during the year.
|
By
region
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| North America |
7,432
|
7,741
|
6,750
|
|||
| Europe |
7,950
|
7,683
|
6,947
|
|||
| International Operations |
6,038
|
5,407
|
3,215
|
|||
| Japan & Korea |
873
|
742
|
1,367
|
|||
| Region China |
725
|
872
|
1,082
|
|||
|
|
|
|
|
|
|
|
| Total |
23,018
|
22,445
|
19,361
|
|||
|
|
|
|
|
|
|
The numbers reflects the large phase 3 and 4 programmes undertaken by Novo Nordisk.
2.5 Animals purchased for research
Accounting policies
Animals purchased for research
is recorded as the number of animals purchased for all research undertaken at
Novo Nordisk either in-house or by external contractors. The number of animals
purchased is based on internal registration of purchased animals and yearly
reports from external contractors.
|
Animals
purchased
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Mice and rats |
70,668
|
64,056
|
60,441
|
|||
| Pigs |
1,170
|
953
|
1,196
|
|||
| Rabbits |
691
|
535
|
543
|
|||
| Dogs |
434
|
344
|
328
|
|||
| Non-human primates |
355
|
186
|
330
|
|||
| Other rodents1 |
283
|
327
|
86
|
|||
| Other vertebrates2 |
0
|
0
|
3
|
|||
|
|
|
|
|
|
|
|
| Total |
73,601
|
66,401
|
62,927
|
|||
|
|
|
|
|
|
|
| 1. | Other rodents are gerbils, guinea pigs and hamsters. |
| 2. | Other vertebrates are fish, chickens, goats and frogs. |
The number of animals purchased for research in 2012 increased by 11% compared with 2011. 96% of the animals purchased were rodents. The increase in the number of animals is due to the increased research activities within early-stage discovery and development of new pharmaceuticals for diagnosis, care and treatment. The increase in the use of large animal species reflects an increase in the diabetes and biopharmaceutical projects that are in more mature development phases.
2012 is the first year when no live animals were used for final quality batch testing (biological production control).
NOVO NORDISK ANNUAL REPORT 2012
|
Supplementary
information
|
CONSOLIDATED
SOCIAL STATEMENT
|
99
|
|
|
||
2.6 New patent families (first filings)
Accounting policies
New patent families (first
filings) is recorded as the number of new patent applications that were filed
during the year.
A total of 65 new patent families were established in 2012, a decrease of 19% compared with the filing activity in 2011 when 80 patent families were established. In 2012, Novo Nordisk had 773 active patent families.
The patent expiry dates for the product portfolio are shown in the table below. The dates provided are for expiry in the US, major European markets (Germany, France and the UK), China and Japan of patents on the active ingredient, unless otherwise indicated, and include extensions of patent term (including for paediatric extension, where applicable). For several products, in addition to the compound patent, Novo Nordisk holds other patents on manufacturing processes, formulations or uses that may extend exclusivity beyond the expiration of the active ingredient patent. Furthermore, data-based exclusivity may be available under pharmaceutical regulatory laws.
|
Marketed
products in key markets (active ingredients)
|
US
|
Europe
|
China
|
Japan
|
||||
|
|
|
|
|
|
|
|
|
|
| Diabetes care: | ||||||||
| NovoRapid® (NovoLog®) |
2014
|
1
|
Expired1
|
Expired1
|
Expired1
|
|||
| NovoMix® 30 (NovoLog® Mix 70/30) |
2014
|
2014–15
|
Expired
|
2014
|
||||
| Levemir® |
2019
|
2018
|
2014
|
2019
|
||||
| NovoNorm® (Prandin®) |
Expired
|
Expired
|
Expired
|
2016
|
||||
| PrandiMet® |
2018
|
3
|
Pending
|
N/A
|
Pending
|
|||
| Victoza® |
2022
|
2022
|
2017
|
2022
|
||||
| Biopharmaceuticals: | ||||||||
| Norditropin® (Norditropin® SimpleXx®) |
2015
|
2
|
2017
|
2
|
2017
|
2
|
2017
|
2
|
| NovoSeven® |
Expired
|
4
|
Expired
|
4
|
Expired
|
4
|
Expired
|
4
|
|
|
|
|
|
|
|
|
|
| 1. | Formulation patent until 2017. It has been revoked in China, but the decision has been appealed. |
| 2. | Formulation patent providing exclusivity to the composition of excipients used in the drug products. |
| 3. | Combination patent providing exclusivity to the combined use of two or more different medicines for treatment of a particular disease. |
| 4. | Room temperature-stable formulation patent until 2024. |
Section 3 Employees
3.1 Employees
Accounting policies
The number of employees
is recorded as all employees except externals, employees on unpaid leave, interns,
bachelor and master thesis employees, and substitutes at year-end.
The rate of turnover is measured as the number of employees, excluding temporary employees, who left the Group during the financial year compared with the average number of employees, excluding temporary employees.
Diverse senior management teams is measured as the percentage of teams that are diverse in terms of both gender and nationality. A senior management team includes all managers and executive assistants reporting directly to an executive vice president/senior vice president.
|
Employees
by region
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| North America |
5,758
|
4,870
|
4,457
|
|||
| Europe |
18,715
|
18,215
|
17,752
|
|||
| International Operations |
5,143
|
4,549
|
3,768
|
|||
| Japan & Korea |
1,071
|
1,010
|
995
|
|||
| Region China |
4,044
|
3,988
|
3,511
|
|||
|
|
|
|
|
|
|
|
| Total employees |
34,731
|
32,632
|
30,483
|
|||
|
|
|
|
|
|
|
|
| Employee turnover |
9.1%
|
9.8%
|
9.1%
|
|||
|
|
|
|
|
|
|
Of the people employed in 2012, 14,792 were employed in Denmark compared with 14,064 in 2011. In 2012 the total number of employees increased by 2,099 (6%) compared with an increase of 2,149 (7%) in 2011.
Diversity in the company’s senior management teams increased from 62% (18 of 29 teams) in 2011 to 66% (19 of 29 teams) in 2012. Among all employees, diversity in terms of gender was 49% women and 51% men.
3.2 Frequency of occupational injuries and absence
Accounting policies
The frequency of occupational
injuries is measured as the number of injuries reported for all employees per
million working hours, excluding externals, employees on unpaid leave, interns,
bachelor and master thesis employees, and substitutes. An occupational injury
is any work-related injury causing at least one day of absence in addition to
the day of the injury.
The rate of absence is measured as absence due to the employee’s own illness, pregnancy-related sick leave, and occupational injuries and illnesses compared with a regional standard average of working days in the year, adjusted for holidays.
Development
In 2012, the number of
occupational accidents with absence increased by 1% compared with 2011. Despite
this slight increase, the frequency of occupational injuries decreased from
3.4 per million working hours in 2011 to 3.2 per million working hours in 2012.
The decrease is due to a continuous focus on occupational health and safety
at Novo Nordisk. The rate of absence also decreased slightly from 2.3% in 2011
to 2.2% in 2012.
NOVO NORDISK ANNUAL REPORT 2012
| 100 | CONSOLIDATED SOCIAL STATEMENT |
Supplementary
information
|
|
|
||
3.3 Employment impact (direct and indirect)
Accounting policies
Employment impact worldwide
is measured as an estimate of the direct and indirect jobs created by Novo Nordisk,
calculated using financial records and general statistics from public sources
such as Statistics Denmark, Updated Economic Multipliers for the US Economy
(the Economic Policy Institute), OECD and the China Statistical Yearbook.
The cash value distribution is calculated based on information from the Consolidated financial statements including sales, payments to suppliers, employee costs, payments to the public sector (taxes), payments to investors and re-investments in the Group.
|
Jobs
created
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Direct impact |
34,300
|
32,100
|
30,000
|
|||
| Indirect impact – production1 |
63,300
|
60,400
|
54,700
|
|||
| Indirect impact – employee | ||||||
| consumption1 |
28,000
|
26,200
|
23,500
|
|||
|
|
|
|
|
|
|
|
| Total |
125,600
|
118,700
|
108,200
|
|||
|
|
|
|
|
|
|
1. Jobs created in the supply chain.
The overall employment impact increased by 6% compared with 2011.
|
Cash
value distribution
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Suppliers |
35%
|
34%
|
38%
|
|||
| Employees |
28%
|
30%
|
31%
|
|||
| Investors/funders |
26%
|
26%
|
23%
|
|||
| Public sector (taxes) |
14%
|
8%
|
6%
|
|||
| Re-invested in the Group |
(3%
|
)
|
2%
|
2%
|
||
|
|
|
|
|
|
|
|
| Total |
100%
|
100%
|
100%
|
|||
|
|
|
|
|
|
|
The distribution of cash value to suppliers, employees and investors/ funders remained stable in 2012 compared with 2011. As the cash value distribution for the year to investors/funders exceeds net cash flow generated from the year’s activities including re-investments, the amount re-invested in the Group is negative for 2012. For presentation of the Statement of cash flows for the year, please refer to the Consolidated financial statement on p 58.
Section 4 Assurance
4.1 Supplier audits
Accounting policies
The number of supplier
audits concluded (audit reports received) is recorded as the responsible sourcing
and quality audits conducted in the areas of direct and indirect spend on materials.
|
By
type of audit
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Responsible sourcing audits |
45
|
32
|
26
|
|||
| Quality audits |
174
|
145
|
166
|
|||
|
|
|
|
|
|
|
|
| Total |
219
|
177
|
192
|
|||
|
|
|
|
|
|
|
No critical findings were issued.
4.2 Product recalls
Accounting policies
The number of product recalls
is recorded as the number of times Novo Nordisk has instituted a recall and
includes recalls in connection with clinical trials. A recall can affect various
countries but only counts as one recall.
Development
In 2012, Novo Nordisk had
six instances of product recalls compared with five product recalls in 2011.
Five of the recalls were due to product defects originating from manufacturing
whereas one recall was due to heat exposure of products in the external distribution
chain. None of the recalled products caused any harm to patients. Local health
authorities were informed in all six instances of recalls to ensure that distributors,
pharmacies, doctors and patients received appropriate information.
4.3 Warning Letters and re-inspections
Accounting policies
Warning Letters and re-inspections
is measured as the number of Warning Letters issued by the US Food and Drug
Administration in connection with GxP-regulated and ISO-certified areas, and
the number of significant re-inspections issued to Novo Nordisk by any health
authority globally. A significant re-inspection occurs following a failed
inspection with global reach and high business impact, and involving top-level
management in the containment and corrective actions.
Development
Novo Nordisk has received
a Warning Letter dated 12 December 2012 from the US Food and Drug Administration
(FDA) following a current Good Manufacturing Practice (cGMP) inspection of an
aseptic filling facility in Bagsværd, Denmark. The facility inspection
took place on 12–20 March 2012, and Novo Nordisk submitted its response
to the inspection findings by the FDA in April 2012.
In the Warning Letter, the FDA cites two specific violations. Novo Nordisk takes the observed violations very seriously and is committed to taking the appropriate steps to address the concerns raised by the agency. The company submitted its response to the Warning Letter on 28 December. Novo Nordisk does not expect the warning letter to have an impact on products currently marketed in the US.
No significant re-inspections were issued to Novo Nordisk by any authority. In total, 130 inspections were concluded in 2012, compared with 76 in 2011, contributing to continuous adjustments.
NOVO NORDISK ANNUAL REPORT 2012
|
Supplementary
information
|
CONSOLIDATED
ENVIRONMENTAL STATEMENT
|
101
|
|
|
||
Statement of environmental performance for the year ended 31 December
|
Note
|
2012
|
2011
|
2010
|
|||||
|
|
|
|
|
|
|
|
|
|
| Resources | ||||||||
| Energy consumption (1,000 GJ) |
2.1
|
2,433
|
2,187
|
2,234
|
||||
| Water consumption (1,000 m3) |
2.2
|
2,475
|
2,136
|
2,047
|
||||
| Emissions and waste | ||||||||
| CO2 emissions from energy consumption (1,000 tons) |
3.1
|
122
|
94
|
95
|
||||
| CO2 emissions from refrigerants (1,000 tons) |
3.1
|
3
|
3
|
6
|
||||
| CO2 emissions from transport (1,000 tons) |
3.1
|
55
|
53
|
57
|
||||
| Wastewater (1,000 m3) |
3.2
|
2,272
|
2,036
|
1,935
|
||||
| Chemical oxygen demand (COD) in wastewater (tons) |
3.2
|
723
|
446
|
555
|
||||
| Waste (tons) |
3.3
|
82,802
|
41,376
|
25,627
|
||||
| Non-hazardous waste (of total waste) |
3.3
|
84%
|
70%
|
54%
|
||||
| Breaches of regulatory limit values |
3.4
|
27
|
22
|
18
|
||||
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 102 | CONSOLIDATED ENVIRONMENTAL STATEMENT |
Supplementary
information
|
|
|
||
As described in the introduction to the financial statements (see p 60), the notes have been reorganised into sections.
In the Consolidated environmental statement, Novo Nordisk reports on two dimensions of performance – ‘resources’ and ‘emissions and waste’ – and progress on long-term targets to continuously reduce environmental impacts.
Sections in the Consolidated environmental statement
Section 1 ‘Basis
of preparation’
Introduces the accounting
policies and standards used for reporting on environmental performance.
Basis of preparation, p 102
Section 2 ‘Resources’
Covers performance related
to consumption of resources for production. Disclosures encompass data on realised
energy and water consumption as well as efforts to reduce environmental impacts.
2.1 Energy consumption,
p 102
2.2 Water consumption,
p 102
Section 3 ‘Emissions
and waste’
Covers performance related
to outputs from production. Disclosures encompass data on realised emissions
and waste as well as efforts to reduce environmental impacts.
3.1 CO2
emissions, p 103
3.2 Wastewater and chemical
oxygen demand (COD) in wastewater, p 103
3.3 Waste, p 103
3.4 Breaches of regulatory
limit values, p 103
Section 1 Basis of preparation
General reporting standards
and principles
The Consolidated environmental
statement is prepared in accordance with the same standards as those for the
Consolidated social statement For a description of these standards, please refer
to section 1 ‘Basis of preparation’ of the Consolidated social statement
on p 96.
Principles of consolidation
The Consolidated environmental
statement covers the impact from production sites, except for CO2
emissions from transportation, which covers Novo Nordisk A/S and entities
controlled by Novo Nordisk A/S.
Environmental accounting
policies
The accounting policies
set out below have been consistently applied in preparation of the Consolidated
environmental statement for all the years presented, with the following exception.
Changes in accounting
policies
‘CO2
emissions from energy consumption’ was previously reported as a three-year
average of emission factors. From this year, the calculation will be based
on the emission factors from the previous year only in order to increase accuracy.
Historical data have been restated accordingly.
The disclosure of ‘Raw materials and packaging materials’ has been taken out, as it is not considered material.
Please refer to the accounting policies stated in the notes for information on the environmental disclosures.
Section 2 Resources
2.1 Energy consumption
Accounting policies
Energy consumption (direct
and indirect supply) is measured as both direct supply of energy (internally
produced energy), which is energy Novo Nordisk produces from mainly natural
gas and wood, and indirect supply of external energy (externally produced energy),
which is electricity, steam and district heat. The consumption of fuel and externally
produced energy is based on meter readings and invoices.
|
1,000
GJ
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Diabetes care |
1,680
|
1,515
|
1,513
|
|||
| Biopharmaceuticals |
316
|
280
|
298
|
|||
| Other |
437
|
392
|
423
|
|||
|
|
|
|
|
|
|
|
| Total |
2,433
|
2,187
|
2,234
|
|||
|
|
|
|
|
|
|
In 2012, the consumption of energy increased by 11% compared with 2011, mainly due to increasing production, especially in diabetes care, where a new insulin filling plant in China has been taken into use.
2.2 Water consumption
Accounting policies
Water consumption is measured
based on meter readings and invoices. It includes drinking water, industrial
water and steam.
|
1,000
m3
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Diabetes care |
2,156
|
1,853
|
1,719
|
|||
| Biopharmaceuticals |
201
|
142
|
142
|
|||
| Other |
118
|
141
|
186
|
|||
|
|
|
|
|
|
|
|
| Total |
2,475
|
2,136
|
2,047
|
|||
|
|
|
|
|
|
|
|
In 2012, the consumption of water increased by 16% mainly due to increasing insulin production and the new insulin filling plant in China.
NOVO NORDISK ANNUAL REPORT 2012
|
Supplementary
information
|
CONSOLIDATED
ENVIRONMENTAL STATEMENT
|
103
|
|
|
||
Section 3 Emissions and waste
3.1 CO2 emissions
Accounting policies
CO2 emissions
from energy consumption
The amount of CO2
emissions from energy consumption covers consumption related to production
measured in metric tons. CO2 emissions from energy consumption
is calculated according to the GHG protocol and based on emission factors
from the previous year.
CO2 emissions
from refrigerants
CO2 emissions
from refrigerants is calculated by converting to metric tons using standard
factors.
CO2 emissions
from transport (product distribution)
CO2 emissions
from product distribution is calculated as the estimated emissions from product
distribution in metric tons. It is calculated as the worldwide distribution
of semi-finished and finished products, raw materials and components by air,
sea and road between production sites and from production sites to affiliates,
direct customers and importing distributors. CO2 emissions from
product distribution from affiliates to pharmacies, hospitals and wholesalers
are not included.
|
1,000
tons
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| CO2 emissions from energy consumption |
122
|
94
|
95
|
|||
| – Diabetes care |
95
|
70
|
68
|
|||
| – Biopharmaceuticals |
9
|
8
|
9
|
|||
| – Other |
18
|
16
|
18
|
|||
| CO2 emissions from refrigerants |
3
|
3
|
6
|
|||
| CO2 emissions from transport |
55
|
53
|
57
|
|||
|
|
|
|
|
|
|
|
| Total |
180
|
150
|
158
|
|||
|
|
|
|
|
|
|
CO2 emissions from energy consumption increased by 30% in 2012 compared with 2011, mainly due to increased energy consumption from increased insulin production in Denmark and the new filling plant in China.
CO2 emissions from transport (product distribution) remained stable.
3.2 Wastewater and chemical oxygen demand (COD) in wastewater
Accounting policies
The volume of wastewater
is measured as process wastewater, sanitary wastewater and drainage water from
fortified areas. The total volume of wastewater is calculated based on input
from the production sites either as a direct measure of the total sum discharged
to public sewer systems or as the total consumption of water of the site minus
registered evaporation from cooling systems (including cooling towers and other
plants from which evaporation occurs) and any large amount of wastewater collected
and treated as waste.
Chemical oxygen demand (COD) in wastewater is a measure of the level of pollutants in the water and is calculated based on in-house test results or standard factors.
Development
The increase in water consumption
led to an increase in the total volume of wastewater of 12%, from 2,036,000
m3
in 2011 to 2,272,000 m3 in
2012. The quantity of discharged COD in the wastewater increased by 62%, from
446 tons in 2011 to 723 tons in 2012, primarily due to increased insulin production
and the new filling plant in China.
3.3 Waste
Accounting policies
Waste is measured as the
sum of non-hazardous and hazardous waste disposed of based on weight receipts.
Non-hazardous waste is calculated as a percentage of the total amount of waste disposed.
|
Tons
of waste
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Non-hazardous waste |
69,937
|
29,131
|
13,911
|
|||
| – Organic production waste for biogas1 |
58,193
|
16,765
|
1,841
|
|||
| – Other non-hazardous waste |
11,744
|
12,366
|
12,070
|
|||
| Hazardous waste |
12,865
|
12,245
|
11,716
|
|||
| – Ethanol |
9,825
|
9,179
|
8,995
|
|||
| – Other hazardous waste |
3,040
|
3,066
|
2,721
|
|||
|
|
|
|
|
|
|
|
| Total waste |
82,802
|
41,376
|
25,627
|
|||
|
|
|
|
|
|
|
|
| Non-hazardous waste (of total waste) |
84%
|
70%
|
54%
|
|||
|
|
|
|
|
|
|
|
Waste
treatment
|
2012
|
2011
|
2010
|
|||
|
|
|
|
|
|
|
|
| Recycling |
84%
|
71%
|
51%
|
|||
| Incineration with energy recovery |
9%
|
16%
|
25%
|
|||
| Incineration without energy recovery |
1%
|
1%
|
1%
|
|||
| Special treatment2 |
5%
|
10%
|
19%
|
|||
| Landfilling |
1%
|
2%
|
4%
|
|||
|
|
|
|
|
|
|
|
| Total |
100%
|
100%
|
100%
|
|||
|
|
|
|
|
|
|
| 1. | Before 2011, most of the organic production waste was used as animal feed and classified as a by-product. From October 2011, all organic production waste is sent for energy recovery in biogas plants. |
| 2. | Waste handled by companies specialised in chemical waste disposal. In 2012, 71% was either process waste requiring special treatment or medicine waste. |
The reclassification of the organic production waste from by-product (animal feed) to waste is the main reason for the significant increase in waste. In addition, increased insulin production also contributed to the increased amounts of organic waste and ethanol. The remaining fractions decreased by 4%.
3.4 Breaches of regulatory limit values
Accounting policies
Breaches of regulatory
limit values covers all breaches reported to the authorities.
Development
The number of breaches
of regulatory limit values increased by 23%, from 22 breaches in 2011 to 27
in 2012, mainly due to breaches related to pH in wastewater. All breaches were
short-term events with no impact on the environment.
NOVO NORDISK ANNUAL REPORT 2012
| 104 | FINANCIAL STATEMENTS OF THE PARENT COMPANY |
|
|
|
Financial
statements
of the parent
company 2012
The following pages encompass the financial statements of the parent company being the legal entity Novo Nordisk A/S. Besides the ownership of the subsidiaries in the Novo Nordisk Group, the activity within the parent company mainly comprises research and development, production, corporate activities and support functions.
Income statement for the year ended 31 December
|
DKK
million
|
Note
|
2012
|
2011
|
|||
|
|
|
|
|
|
|
|
| Sales |
2
|
49,834
|
40,452
|
|||
| Cost of goods sold |
3
|
12,271
|
11,861
|
|||
|
|
|
|
|
|
|
|
| Gross profit |
37,563
|
28,591
|
||||
|
|
||||||
| Sales and distribution costs |
3
|
11,626
|
10,655
|
|||
| Research and development costs |
3
|
9,071
|
7,851
|
|||
| Administrative costs |
3
|
1,439
|
1,531
|
|||
| Licence fees and other operating income, net |
796
|
651
|
||||
|
|
|
|
|
|
|
|
| Operating profit |
16,223
|
9,205
|
||||
| Profit in subsidiaries, net of tax |
10
|
9,914
|
10,494
|
|||
| Financial income |
4
|
139
|
437
|
|||
| Financial expenses |
4
|
1,792
|
882
|
|||
|
|
|
|
|
|
|
|
| Profit before income taxes |
24,484
|
19,254
|
||||
|
Income
taxes
|
5
|
3,037
|
2,200
|
|||
|
|
|
|
|
|
|
|
| Net profit for the year | 21,447 | 17,054 | ||||
|
|
|
|
|
|
|
|
| Proposed appropriation of net profit: | ||||||
| Dividends | 9,715 | 7,742 | ||||
| Net revaluation reserve according to the equity method | 9 | 731 | (1,767 | ) | ||
| Retained earnings | 9 | 11,001 | 11,079 | |||
|
|
|
|
|
|
|
|
| 21,447 | 17,054 | |||||
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
|
FINANCIAL
STATEMENTS OF THE PARENT COMPANY
|
105
|
|
|
|
Balance sheet at 31 December
|
DKK
million
|
Note
|
2012
|
2011
|
|||
|
|
|
|
|
|
|
|
| Assets | ||||||
| Intangible assets | 7 | 1,153 | 1,159 | |||
| Property, plant and equipment | 8 | 14,628 | 14,257 | |||
| Financial assets | 10 | 18,046 | 17,443 | |||
|
|
|
|
|
|
|
|
| Total non-current assets | 33,827 | 32,859 | ||||
|
|
|
|
|
|
|
|
| Raw materials | 1,268 | 1,262 | ||||
| Work in progress | 3,824 | 3,941 | ||||
| Finished goods | 1,857 | 1,967 | ||||
|
|
|
|
|
|
|
|
| Inventories | 6,949 | 7,170 | ||||
|
|
|
|
|
|
|
|
| Trade receivables | 1,509 | 1,392 | ||||
| Amounts owed by affiliates | 8,921 | 7,312 | ||||
| Tax receivables | 1,052 | 764 | ||||
| Other receivables | 756 | 756 | ||||
|
|
|
|
|
|
|
|
| Receivables | 12,238 | 10,224 | ||||
|
|
|
|
|
|
|
|
| Deferred income tax assets | 6 | – | 222 | |||
| Marketable securities | 4,544 | 4,082 | ||||
| Derivative financial instruments | 931 | 48 | ||||
| Cash at bank and in hand | 10,693 | 12,399 | ||||
|
|
|
|
|
|
|
|
| Total current assets | 35,355 | 34,145 | ||||
|
|
|
|
|
|
|
|
| Total assets | 69,182 | 67,004 | ||||
|
|
|
|
|
|
|
|
Equity and liabilities
| Share capital |
560
|
580
|
||||
| Net revaluation reserve according to the equity method |
8,771
|
8,225
|
||||
| Retained earnings |
31,301
|
28,643
|
||||
|
|
|
|
|
|
|
|
| Total equity |
9
|
40,632 | 37,448 | |||
|
|
|
|
|
|
|
|
| Deferred income tax liabilities | 6 | 52 | – | |||
| Other provisions | 12 | 704 | 631 | |||
|
|
|
|
|
|
|
|
| Total provisions | 756 | 631 | ||||
|
|
|
|
|
|
|
|
| Loans | – | 502 | ||||
|
|
|
|
|
|
|
|
| Non-current liabilities | 11 | – | 502 | |||
|
|
|
|
|
|
|
|
| Current debt | 137 | 25 | ||||
| Derivative financial instruments | 48 | 1,492 | ||||
| Trade payables | 1,764 | 1,582 | ||||
| Amounts owed to affiliates | 22,401 | 22,384 | ||||
| Tax payables | – | 1 | ||||
| Other liabilities | 3,444 | 2,939 | ||||
|
|
|
|
|
|
|
|
| Current liabilities | 27,794 | 28,423 | ||||
|
|
|
|
|
|
|
|
| Total liabilities | 27,794 | 28,925 | ||||
|
|
|
|
|
|
|
|
| Total equity and liabilities | 69,182 | 67,004 | ||||
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2012
| 106 | FINANCIAL STATEMENTS OF THE PARENT COMPANY |
|
|
|
Notes
1 Accounting policies
The financial statements of the parent company have been prepared in accordance with the Danish Financial Statements Act (Class D) and other accounting regulations for companies listed on NASDAQ OMX Copenhagen.
The accounting policies for the financial statements of the parent company are unchanged from the last financial year and are the same as for the consolidated financial statements with the following additions. For a description of the accounting policies of the Group, please refer to the Consolidated financial statements, pp 60 – 62.
Supplementary accounting policies for the parent company
Financial assets
In the financial statements
of the parent company, investments in subsidiaries and associated companies
are recorded under the equity method, which is at the respective share of
the net asset values in subsidiaries and associated companies. Any cost in
excess of net assets in the acquired company is capitalised in the parent
company under Financial assets as part of investments in subsidiaries (‘Goodwill’).
Amortisation of goodwill is provided under the straight-line method over a
period not exceeding 20 years based on estimated useful life.
Net profit of subsidiaries less unrealised intra-Group profits is recorded in the Income statement of the parent company.
To the extent it exceeds declared dividends from such companies, net revaluation of investments in subsidiaries is transferred to Net revaluation reserve under Equity according to the equity method.
Fair value adjustments of financial assets categorised as ‘Available for sale’ in the parent company are recognised in the Income statement.
Profits in subsidiaries are disclosed as profit after tax.
Tax
For Danish tax purposes,
the parent company is assessed jointly with its Danish subsidiaries. The Danish
jointly taxed companies are included in a Danish on-account tax payment scheme
for Danish corporate income tax. All current taxes under the scheme are recorded
in the individual com panies.
Statement of cash
flows
No separate statement of
cash flows has been prepared for the parent company; please refer to the Consolidated
Statement of cash flows on p 58.
2 Sales
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Sales by business segment1 | ||||
| Diabetes care |
49,479
|
39,978
|
||
| Biopharmaceuticals |
355
|
474
|
||
|
|
|
|
|
|
| Total sales | 49,834 | 40,452 | ||
|
|
|
|
|
|
| Sales by geographical segment1 | ||||
| North America | 20,463 | 14,018 | ||
| Europe | 13,201 | 12,308 | ||
| International Operations | 7,986 | 6,796 | ||
| Japan & Korea | 3,992 | 3,699 | ||
| Region China | 4,192 | 3,631 | ||
|
|
|
|
|
|
| Total sales | 49,834 | 40,452 | ||
|
|
|
|
|
|
| Sales are attributed to geographical segment based on location of the customer. | |
| 1. | For definitions of the segments, please refer to note 2.2 in the Consolidated financial statements. |
3 Employee costs
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Wages and salaries |
7,076
|
6,725
|
||
| Share-based payment costs |
167
|
126
|
||
| Pensions |
663
|
620
|
||
| Other social security contributions |
183
|
177
|
||
| Other employee costs |
264
|
257
|
||
|
|
|
|
|
|
| Total employee costs | 8,353 | 7,905 | ||
|
|
|
|
|
|
| Included in the Balance sheet as change | ||||
| in employee costs included in Inventories | (7 | ) | (91 | ) |
|
|
|
|
|
|
For information regarding remuneration to the Board of Directors and Executive Management, please refer to ‘Remuneration’ pp 49 –51 and note 2.3 in the Consolidated financial statements.
|
2012
|
2011
|
|||
|
|
|
|
|
|
| Average number of full-time | ||||
| employees in Novo Nordisk A/S | 12,003 | 11,559 | ||
|
|
|
|
|
|
4 Financial income and financial expenses
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Interest income relating to subsidiaries |
31
|
17
|
||
| Other financial income |
108
|
420
|
||
|
|
|
|
|
|
| Total financial income | 139 | 437 | ||
|
|
|
|
|
|
| Interest expenses relating to subsidiaries | 70 | 163 | ||
| Foreign exchange loss (net) | 148 | 337 | ||
| Other financial expenses | 1,574 | 382 | ||
|
|
|
|
|
|
| Total financial expenses | 1,792 | 882 | ||
|
|
|
|
|
|
5 Income taxes
According to the Danish joint taxation regime, all Danish group companies are automatically taxed on a joint basis. Hence Novo Nordisk A/S and its Danish subsidiaries are included in the joint taxation scheme of the parent company, Novo A/S. Novo Nordisk A/S and its Danish subsidiaries’ tax contribution to the joint taxation in 2012 amounts to DKK 3,527 million (DKK 2,330 million in 2011).
In 2012, Novo Nordisk A/S paid (cash) income taxes of DKK 4,235 million related to the current year (DKK 3,075 million in 2011) and DKK 3,620 million in taxes regarding prior years (a refund of DKK 269 million in 2011). Furthermore, DKK 40 million has been paid in income taxes by Danish subsidiaries (a payment of DKK 19 million in 2011).
6 Deferred income tax assets/(liabilities)
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| The deferred tax assets/liabilities are allocated | ||||
| to the various balance sheet items as follows: |
|
|||
| Property, plant and equipment |
(912
|
)
|
(1,018
|
)
|
| Indirect production costs |
(810
|
)
|
(874
|
)
|
| Unrealised profit on intra-Group sales |
2,024
|
|
1,945
|
|
| Other |
(354
|
)
|
169
|
|
|
|
|
|
|
|
| Total income tax assets/(liabilities) | (52 | ) | 222 | |
|
|
|
|
|
|
The deferred income tax has been calculated using a tax rate of 25%.
NOVO NORDISK ANNUAL REPORT 2012
|
FINANCIAL
STATEMENTS OF THE PARENT COMPANY
|
107
|
|
|
|
7 Intangible assets
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Cost at the beginning of the year |
1,872
|
1,694
|
||
| Additions during the year |
119
|
179
|
||
| Disposals during the year |
–
|
(1
|
)
|
|
|
|
|
|
|
|
|
Cost
at the end of the year
|
1,991
|
1,872
|
||
|
|
|
|
|
|
| Amortisation at the beginning of the year |
713
|
611
|
||
| Amortisation during the year |
97
|
66
|
||
| Impairment losses for the year |
28
|
36
|
||
|
|
|
|
|
|
|
Amortisation
at the end of the year
|
838
|
713
|
||
|
|
|
|
|
|
| Carrying amount at the end of the year | 1,153 | 1,159 | ||
|
|
|
|
|
|
Intangible assets primarily relate to patents and licences, internally developed software and costs related to major IT projects.
8 Property, plant and equipment
|
Payments
|
||||||||||||
|
on
account
|
||||||||||||
|
and
assets
|
||||||||||||
|
Land
and
|
Plant
and
|
Other
|
in
course of
|
|||||||||
| DKK million |
buildings
|
machinery | equipment | construction |
2012
|
2011
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the beginning of the year | 10,508 | 14,297 | 1,853 | 2,649 | 29,307 | 28,361 | ||||||
| Additions during the year | 115 | 109 | 66 | 1,887 | 2,177 | 1,727 | ||||||
| Disposals during the year | (250 | ) | (132 | ) | (31 | ) | (413 | ) | (781 | ) | ||
| Transfer from/(to) other items | 430 | 294 | 102 | (826 | ) | 0 | 0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 10,803 | 14,568 | 1,990 | 3,710 | 31,071 | 29,307 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the beginning of the year | 4,191 | 9,618 | 1,241 | – | 15,050 | 13,943 | ||||||
| Depreciation for the year | 451 | 1,097 | 156 | 1,704 | 1,725 | |||||||
| Impairment losses for the year | 17 | 67 | 2 | 86 | 93 | |||||||
| Depreciation reversed on disposals during the year | (246 | ) | (124 | ) | (27 | ) | (397 | ) | (711 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the end of the year | 4,413 | 10,658 | 1,372 | – | 16,443 | 15,050 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 6,390 | 3,910 | 618 | 3,710 | 14,628 | 14,257 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 Statement of changes in equity
|
Net
|
||||||||||
|
Share
|
revaluation
|
Retained
|
||||||||
| DKK million | capital | reserve |
earnings
|
2012
|
2011
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the beginning of the year | 580 | 8,225 | 28,643 | 37,448 | 36,956 | |||||
| Appropriated from Net profit for the year | 11,001 | 11,001 | 11,079 | |||||||
| Proposed dividends | 9,715 | 9,715 | 7,742 | |||||||
| Appropriated from Net profit for the year to Net revaluation reserve | 731 | 731 | (1,767 | ) | ||||||
| Effect of hedged forecast transactions transferred to the Income statement | 1,118 | 1,118 | 658 | |||||||
| Fair value adjustments of cash flow hedges for the year | 832 | 832 | (1,118 | ) | ||||||
| Dividends paid | (7,742 | ) | (7,742 | ) | (5,700 | ) | ||||
| Share-based payments (note 3) | 167 | 167 | 126 | |||||||
| Tax credit related to share option scheme | 31 | 31 | – | |||||||
| Purchase of treasury shares | (12,162 | ) | (12,162 | ) | (10,839 | ) | ||||
| Sale of treasury shares | 266 | 266 | 244 | |||||||
| Reduction of the B share capital | (20 | ) | 20 | 0 | 0 | |||||
| Exchange rate adjustments of investments in subsidiaries | (185 | ) | 13 | (172 | ) | (173 | ) | |||
| Tax on own shares | – | – | (123 | ) | ||||||
| Other adjustments | (601 | ) | (601 | ) | 363 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the end of the year | 560 | 8,771 | 31,301 | 40,632 | 37,448 | |||||
|
|
|
|
|
|
|
|
|
|
|
Please refer to note 4.1
in the Consolidated financial statements regarding average number of shares.
Please refer to note 4.1
in the Consolidated financial statements regarding total number of A and B shares
in Novo Nordisk A/S and treasury shares.
NOVO NORDISK ANNUAL REPORT 2012
| 108 | FINANCIAL STATEMENTS OF THE PARENT COMPANY |
|
|
|
10 Financial assets
|
Other
|
||||||||||
|
Amounts
|
securities
|
|||||||||
|
Investments
|
owed
by
|
and
|
||||||||
| DKK million | in subsidiaries | affiliates | investments |
2012
|
2011
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the beginning of the year | 8,805 | 101 | 663 | 9,569 | 9,523 | |||||
| Investments during the year | 257 | 11 | 268 | 119 | ||||||
| Divestments during the year | (124 | ) | (124 | ) | (73 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 8,805 | 234 | 674 | 9,713 | 9,569 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Value adjustments at the beginning of the year | 23,559 | (1 | ) | (445 | ) | 23,113 | 24,368 | |||
| Profit/(loss) before tax | 13,883 | 13,883 | 13,621 | |||||||
| Income taxes on profit for the year | (3,342 | ) | 2 | (3,340 | ) | (2,629 | ) | |||
| Dividends received | (13,039 | ) | (13,039 | ) | (12,041 | ) | ||||
| Divestments during the year | – | 31 | ||||||||
| Effect of exchange rate adjustment | (498 | ) | 1 | 15 | (482 | ) | 11 | |||
| Other adjustments | (365 | ) | (103 | ) | (468 | ) | (248 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| Value adjustments at the end of the year | 20,198 | – | (531 | ) | 19,667 | 23,113 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealised internal profit at the beginning of the year | (15,239 | ) | (15,239 | ) | (14,577 | ) | ||||
| Change for the year – charged to Income statement | (627 | ) | (627 | ) | (498 | ) | ||||
| Change for the year – charged to Equity | 4,219 | 4,219 | ||||||||
| Effect of exchange rate adjustment | 313 | 313 | (164 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| At the end of the year | (11,334 | ) | – | – | (11,334 | ) | (15,239 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 17,669 | 234 | 143 | 18,046 | 17,443 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of investments in subsidiaries does not include capitalised goodwill at the end of the year. An investment of DKK 41 million has been reclassified from associated company to Other securities and investments. The cost was DKK 134 million and value adjustment was DKK (93) million.
A list of companies in the Novo Nordisk Group is found in note 5.8 in the Consolidated financial statements.
11 Non-current liabilities
Non-current liabilities due more than five years from the balance sheet date amount to DKK 0 million (DKK 306 million in 2011).
12 Other provisions
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Non-current |
480
|
474
|
||
| Current |
224
|
157
|
||
|
|
|
|
|
|
| Total other provisions |
704
|
631 | ||
|
|
|
|
|
|
Provisions for pending litigations are recognised as Other provisions. Furthermore, as part of normal business Novo Nordisk issues credit notes for expired goods. Consequently, a provision for future returns is made, based on historical product return statistics.
13 Commitments and contingencies
|
DKK
million
|
2012
|
2011
|
||
|
|
|
|
|
|
| Commitments | ||||
| Lease commitments | 993 | 987 | ||
| Contractual obligations relating to | ||||
| investments in property, plant and equipment | 107 | 11 | ||
| Guarantees given for subsidiaries | 4,523 | 4,217 | ||
| Obligations relating to research and | ||||
| development projects | 2,915 | 2,774 | ||
| Other guarantees and commitments | 2,574 | 3,352 | ||
| Lease commitments expiring | ||||
| within the following periods | ||||
| from the balance sheet date | ||||
| Within one year | 191 | 196 | ||
| Between one and five years | 534 | 490 | ||
| After five years | 268 | 301 | ||
|
|
|
|
|
|
| Total lease commitments | 993 | 987 | ||
|
|
|
|
|
|
| The lease costs for 2012 and 2011 were | ||||
| DKK 335 million and DKK 308 million respectively. | ||||
| Security for debt | ||||
| Land, buildings and equipment etc | ||||
| at carrying amount | 90 | 1,374 | ||
|
|
|
|
|
|
For information on pending litigation and other contingencies, please refer to note 5.4 to the Consolidated financial statements.
14 Related party transactions
For information on transactions with related parties, please refer to note 5.5 to the Consolidated financial statements.
NOVO NORDISK ANNUAL REPORT 2012
|
Management
statement
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
109
|
|
|
||
Statement by the Board of Directors and Executive Management on the Annual Report
Today, the Board of Directors and Executive Management approved the Annual Report of Novo Nordisk A/S for the year 2012.
The Consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB), and International Financial Reporting Standards as endorsed by the EU. The Financial statements of the parent company, Novo Nordisk A/S, are prepared in accordance with the Danish Financial Statements Act.
Further, the Consolidated financial statements, the Financial statements of the parent company and Management’s Review are prepared in accordance with additional Danish disclosure requirements for listed companies.
In our opinion, the Consolidated financial statements and the Financial statements of the parent company give a true and fair view of the financial position at 31 December 2012, the results of the Group and parent
company operations, and consolidated cash flows for the financial year 2012. Furthermore, in our opinion, Management’s Review includes a true and fair account of the development in the operations and financial circumstances, of the results for the year and of the financial position of the Group and the parent company as well as a description of the most significant risks and elements of uncertainty facing the Group and the parent company.
Novo Nordisk’s consolidated social and environmental statements have been prepared in accordance with the reporting principles of materiality, inclusivity and responsiveness of AA1000APS(2008). They give a balanced and reasonable presentation of the organisation’s social and environmental performance.
We recommend that the Annual Report be adopted at the Annual General Meeting.
Bagsværd, 30 January 2013
 |
 |
||
| Executive Management |
Lars
Rebien Sørensen
|
Jesper
Brandgaard
|
|
|
President
and CEO
|
CFO
|
||
 |
 |
 |
|
|
Lise
Kingo
|
Kåre
Schultz
|
Mads
Krogsgaard Thomsen
|
|
 |
 |
 |
|
| Board of Directors |
Sten
Scheibye
|
Göran
Ando
|
Bruno
Angelici
|
|
Chairman
|
Vice
chairman
|
||
 |
 |
 |
|
|
Henrik
Gürtler
|
Liz
Hewitt
|
Ulrik
Hjulmand-Lassen
|
|
|
Audit
Committee member
|
|||
 |
 |
 |
|
|
Thomas
Paul Koestler
|
Anne
Marie Kverneland
|
Kurt
Anker Nielsen
|
|
|
Audit
Committee member
|
|||
 |
 |
 |
|
|
Søren
Thuesen Pedersen
|
Hannu
Ryöppönen
|
Stig
Strøbæk
|
|
|
Chairman
of
|
|||
|
the
Audit Committee
|
NOVO NORDISK ANNUAL REPORT 2012
| 110 | INDEPENDENT AUDITOR'S REPORT |
|
|
|
Independent Auditor’s Reports
To the Shareholders of Novo Nordisk A/S
Report on Consolidated financial statements and Financial statements of the Parent Company
We have audited the Consolidated financial statements and the Financial statements of Novo Nordisk A/S for the financial year 2012, pp 55 – 93 and pp 104 –108, which comprise Income Statement, Balance Sheet, Statement of Changes in Equity and Notes including accounting policies for the Group as well as for the Parent Company and Statement of Comprehensive Income and Cash Flow Statement for the Group.
The Consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and International Financial Reporting Standards as endorsed by the EU. The Financial statements of the Parent Company are prepared in accordance with the Danish Financial Statements Act. Moreover, both the Consolidated financial statements and the Financial statements of the Parent Company are prepared in accordance with additional Danish disclosure requirements for listed companies.
Management’s
Responsibility for the Consolidated financial statements and the Financial
statements of the Parent Company
The Management is responsible
for the preparation of the Consolidated financial statements and the Financial
statements of the Parent Company that give a true and fair view in accordance
with the above legislation and accounting standards, and for such internal
control as Management determines is necessary to enable preparation of Consolidated
financial statements and Financial statements of the Parent Company that are
free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to
express an opinion on the Consolidated financial statements and the Financial
statements of the Parent Company based on our audit. We conducted our audit
in accordance with International standards on Auditing and additional requirements
under Danish Audit regulation. This requires that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether
the Consolidated financial statements and the Financial statements of the
Parent Company are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Consolidated financial statements and the Financial statements of the Parent Company. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Consolidated financial statements and the Financial statements of the Parent Company, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of Consolidated financial statements and Financial statements of the Parent Company that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management, as well as evaluating the overall presentation of the Consolidated financial statements and the Financial statements of the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Our audit has not resulted in any qualification.
Opinion
In our opinion, the Consolidated
financial statements give a true and fair view of the financial position at
31 December 2012 of the Group and of the results of the Group’s operations
and consolidated cash flows for the financial year 2012 in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and International Financial Reporting Standards
as endorsed by the EU and additional Danish disclosure requirements for listed
companies. Moreover, in our opinion the Financial statements of the Parent
Company give a true and fair view of the financial position at 31 December
2012 and of the results of the Parent Company’s operations for the financial
year 2012 in accordance with the Danish Financial Statements Act and additional
Danish disclosure requirements for listed companies.
Statement on Management’s Review
We have read Management’s Review, pp 1– 54 and p 94 in accordance with the Danish Financial Statements Act.
On this basis, it is our opinion that the information provided in the Management’s Review is consistent with the Consolidated financial statements and the Financial statements of the Parent Company.
Bagsværd, 30 January 2013
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
 |
 |
| Lars Holtug |
Lars
Baungaard
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| Danish State Authorised |
Danish
State Authorised
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| Public Accountant |
Public
Accountant
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NOVO NORDISK ANNUAL REPORT 2012
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INDEPENDENT
ASSURANCE REPORT
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111
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Independent Assurance Report on the social and environmental reporting for 2012
To the Stakeholders of Novo Nordisk
We have reviewed the Consolidated social and environmental information in the Annual Report of Novo Nordisk A/S for the financial year 2012, which comprises Management’s Review, the social accounting policies and environmental accounting policies for Consolidated social and environmental information including the Consolidated social and environmental statement on pp 1– 54, 94 and pp 95 –103.
The assurance engagement has furthermore covered the nature and extent of Novo Nordisk incorporation of the AA1000 AccountAbility Principles Standard (AA1000APS(2008)) principles (inclusivity, materiality and responsiveness) with respect to stakeholder dialogue.
Criteria for the
preparation of reporting on data
The Consolidated social
and environmental information is prepared in accordance with the social accounting
policies and environmental accounting policies described on pp 96 –100
and pp 102–103.
Management’s
responsibility
The Management is responsible
for preparing the Consolidated social and environmental information, including
for establishing data collection and registration, internal control systems
with a view to ensuring reliable reporting, specifying acceptable reporting
criteria and choosing data to be collected for intended users of the report.
Also, adherence to AA1000APS(2008) and the three principles of inclusivity,
materiality and responsiveness is the responsibility of Management.
Assurance provider’s
responsibility
Our responsibility is,
on the basis of our work, to express a conclusion on the reliability of the
Consolidated social and environmental information in the Annual Report. Furthermore,
our responsibility is, by applying the AA1000 Assurance Standard (AA1000AS(2008)),
to express a conclusion on as well as to make recommendations for the nature
and extent of Novo Nordisk’s adherence to the AA1000APS(2008) principles.
Our team of experts has competences in respect of assurance engagements related to Consolidated social and environmental information. In addition, our team has competences in assessing social and environmental information and sustainability management, and thus qualifies to conduct this independent assurance engagement. During 2012 we have not performed any tasks or services to Novo Nordisk or other clients that would conflict with our independence, nor have we been responsible for the preparation of any part of the report; and therefore qualify as independent as defined by in AA1000AS(2008).
Scope, standards
and criteria used
We have planned and performed
our work in accordance with the International
Standard on Assurance Engagements (ISAE) 3000, “Assurance Engagements
other than Audits or Reviews of Historical Financial Information”, to
obtain limited assurance that the Consolidated social and environmental information
in the Annual Report is free of material misstatements and that the information
has been presented in accordance with the social accounting policies and environmental
accounting policies here for. The assurance obtained is limited, as our work
compared to that of an engagement with reasonable assurance has been limited
to, principally, inquiries, interviews and analytical procedures related to
registration and communication systems, data and underlying documentation.
Moreover, we have planned and performed our work based on the AA1000AS(2008), using the criteria in the AA1000APS(2008), to perform a Type 2 engagement and to obtain a moderate level of assurance regarding the nature and extent of Novo Nordisk’s adherence to the principles of inclusivity, materiality and responsiveness.
Methodology, approach,
limitation and scope of work
Based on an assessment
of materiality and risk, our work included: (i) Inquiries regarding procedures
and methods to ensure that social and environmental reporting include data
from the Group’s Business Unit operations, and that these data have been
incorporated in compliance with the social accounting policies and environmental
accounting policies. Through site visits to Bagsværd, Hillerød
and Kalundborg and based on requests and selected documentation, we have furthermore
assessed the existing systems for data collection and registration, and procedures
to ensure reliable reporting;
(ii) Inquiries and interviews with members of the Executive Management, Corporate Finance, Diabetes Research, Public Affairs, Corporate Communication, Marketing, Corporate Sustainability, as well as Management in the Brazilian affiliate, regarding Novo Nordisk’s adherence to the principles of inclusivity, materiality and responsiveness, including Management’s commitment to the principles, the existence of systems and procedures to support adherence to the principles and the embedding of the principles at corporate level.
Conclusion
Based on our review, nothing
has come to our attention which causes us not to believe that the Consolidated
social and environmental information presented in the Annual Report of Novo
Nordisk A/S for 2012 (on pp 1– 54, 94 and pp 95 –103) is free of
material misstatements and has been stated in accordance with the social accounting
policies and environmental accounting policies here for.
Furthermore, nothing has come to our attention causing us to believe that Novo Nordisk does not adhere to the AA1000APS(2008) principles.
Observations and
recommendations
According to AA1000AS(2008),
we are required to include observations and recommendations for improvements
in relation to adherence to the AA1000APS(2008) principles:
Regarding inclusivity
We continue to see a strong
commitment to accountability within Novo Nordisk with systems and processes
in place to support stakeholder participation at corporate level. We commend
the guidelines developed during 2012 to advance the stakeholder engagement
and sustainability understanding across the business as well as the organizational
set-up planned to support the implementation.
We recommend that Novo Nordisk specifically builds stakeholder engagement and sustainability capacity at the affiliate level through the guidelines developed to ensure alignment between the approaches taken and the level of understanding at corporate and local level.
Regarding materiality
We observe that Novo Nordisk
takes the principle of materiality into consideration in its decision making
processes by applying the triple bottom line principle. Also, Novo Nordisk
continues to discuss, evaluate and determine the materiality of sustainability
issues on an ongoing basis through a number of relevant governance bodies
with senior management representation from across the business. Specifically
with regards to external reporting we commend that Novo Nordisk is refining
the materiality filters applied.
We have no significant
recommendations regarding materiality.
Regarding responsiveness
Being responsive to stakeholder
needs and concerns is key to Novo Nordisk and evident from their use of boards,
media, forums and communication channels to engage in dialogue and convey
messages. Increasingly we observe how the focus on the patient is being reflected
in the development of responses.
We have no significant recommendations regarding responsiveness.
Bagsværd, 30 January 2013
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
|
|
| Lars Holtug |
Lars
Baungaard
|
| Danish State Authorised |
Danish
State Authorised
|
| Public Accountant |
Public
Accountant
|
NOVO NORDISK ANNUAL REPORT 2012
| 112 | ADDITIONAL INFORMATION |
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The Novo Nordisk Annual Report 2012 is available in print, online as a PDF and as an app for iPad. In addition, Novo Nordisk provides disclosures in separate reports to satisfy specific legal requirements and stakeholder interests.
Annual report formats
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Print
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PDF
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iPad
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| Can be ordered at novonordisk.com/annualreport. | The report can be downloaded at novonordisk.com/annualreport. | App with easy navigation and enhanced user experience can be downloaded from Apple’s App Store by searching on Novo Nordisk Annual Report (available February 2013). | |||||
Additional reporting
Can be downloaded at novonordisk.com/annualreport
(available February 2013).
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Report |
Reason for reporting | Content | ||||||
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Form 20-F |
Requirement
by US Securities and Exchange
Commission (SEC) for foreign private
issuers with equity shares listed on
exchanges in the United States
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Annual
reporting to SEC in a
standardised reporting format so that investors
can evaluate the company alongside
US domestic equities
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Corporate Governance
Report |
Requirement according to theDanish Financial Statements Act | Reporting of compliance with Danish Corporate Governance Recommendations | ||||||
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United Nations
Global Compact |
Voluntary commitment to the UN Global Compact initiative and also serves as a requirement by the Danish Financial Statements Act, section 99a | Communication of progress in relation to the 10 principles in the areas of human rights, labour, environment and anti-corruption and UN goals. Additional progress reporting on corporatesustainability leadership as a LEAD member of the UN Global Compact | ||||||
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Global Reporting
Initiative |
Novo Nordisk has since 2002 voluntarily provided additional reporting in accordance with the Global Reporting Initiative, the most prevalent standardised sustainability reporting | Disclosure of management approach and performance for economic, social and environmental impacts, as well as human rights, product responsibility and societal activity |
This public filing contains references and links to information posted on the company’s and third-party websites, which are not incorporated by reference into the public filing. The Management review on pp 1–54 and 94, the supplementary information on pp 95–103 and the Communication on Progress to the UN Global Compact address the requirements of the Danish Financial Statements Act section 99a; see also p 96.
References for the Annual Report 2012: Strategy is all about choice: 1. International Diebetes Federation. IDF Diabetes Atlas, fifth edition, 2012 update. 2. http://www.who.int/mediacentre/ factsheets/fs311/en/index.html. Diabetes – an emergency in slow motion: 1. UKPDS, Stratten et al. BMJ 2000; vol 321:405–412. 2. Fong DS, Aiello LP, Ferris FL 3rd, Klein R: Diabetic retinopathy. Diabetes Care 2001;27:2540–2553. 3. International Diabetes Federation. IDF Diabetes Atlas, fifth edition, 2012 update. Insulin treatment is a balancing act: 1. The UK Perspective Diabetes Study (UKPDS) 1998. Intensive blood glucose control with sulphonylureas or insulin compared with conventional treatment and risk of complications in patients with type 2 diabetes (UKPDS 34). The Lancet 352:837–53. 2. The Diabetes Control and Complications Trial Research Group 1993. The effect of intensive treatment of diabetes on the development and progression of long-term complications in insulin-dependent diabetes mellitus. N Engl J Med 329:977–986. Prevent bleedings: 1. hemophilia.org/NHFWeb/MainPgs/MainNHF.aspx?menuid=259&contentid=476. 2. http://www1.wfh.org/ publications/files/pdf-1427.pdf. 3. http://www.cdc.gov/Features/HemophiliaDay. Product overview: 1. Not all products approved in all markets.
Design and production: ADtomic Communications. Accounts and notes:Team2Graphics. Printing: Bording PRO as, February 2013. Photography: ADtomic Communications, Idzi Dutkiewicz, Per Fledelius, Willi Hansen, iStockphoto, Ulrik Jantzen/Das Büro, Martin Juul, Olivier Leroy, Noel Malcolm, Yasu Nakaoka, Kristof Ramon, Mike Rulis, Dominique Schneider, Peter Sørensen, Jesper Westley, Andrew Wilz and product portfolio.
NOVO NORDISK ANNUAL REPORT 2012
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ADDITIONAL
INFORMATION
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113
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Novo Nordisk has more than 30 products on the market. This page presents an overview of European trade names with accompanying generic names. Trade and generic names may differ in other markets.1
DIABETES
CARE
Modern insulins: 1.
Levemir®
,
insulin detemir. 2. NovoRapid®
,
insulin aspart. 3. NovoMix®
30, biphasic insulin aspart. 4. NovoMix®
50, biphasic insulin aspart. 5. NovoMix®
70, biphasic insulin aspart. Glucagon-Like Peptide-1:
6. Victoza®
,
liraglutide. Human insulins: 7. Insulatard®
,
isophane (NPH) insulin. 8. Actrapid®
,
regular human insulin. 9. Mixtard®
30, biphasic human insulin. Diabetes devices: 10. FlexTouch®
,
prefilled insulin delivery system. 11. FlexPen®
, prefilled insulin delivery system. 12. NovoPen®
5, durable insulin delivery system with memory function. 13.
NovoPen®
4, durable insulin delivery system with memory function. 14.
NovoPen Echo®
,
durable insulin delivery system with memory function. 15.
InnoLet®
, prefilled
insulin delivery system. 16. NovoFine®
,
needle. 17. NovoTwist®
, needle.
18. GlucaGen®
,
glucagon. Oral antidiabetic agents: 19. NovoNorm®
,
repaglinide. 20. PrandiMet®
,
repaglinide/metformin.
BIOPHARMACEUTICALS
Haemostasis: 21. NovoSeven®
,
recombinant factor VIIa, also available with prefilled syringe in an increasing
number of countries. 22. NovoThirteen®
,
recombinant FXIII. Human growth hormone: 23. Norditropin®
, somatropin (rDNA origin). 24.
Norditropin®
FlexPro®
, prefilled multidose
delivery system. 25. PenMate®
, automatic needle inserter (available for Norditropin®
FlexPro®
, NordiFlex®
and SimpleXx®
). 26.
Norditropin NordiFlex®
,
prefilled multidose delivery system. 27. NordiPen®
,
durable multidose delivery system. 28. NordiPenMate®
, automatic needle insertion. 29. NordiLet®
,
prefilled multidose delivery system. Hormone replacement
therapy: 30. Activelle®
,
estradiol/norethisterone acetate. 31. Estrofem®
, estradiol. 32. Novofem®
,
estradiol/norethisterone acetate. 33. Vagifem®
, estradiol hemihydrate.
Market share data on pp 6, 7, 8, 16, 17, 18, 33, 35, 36 and 37 is from IMS Health, IMS MIDAS Customized Insights (November 2012). Market definition for retail: Algeria, Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, India, Ireland, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Saudi Arabia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, the UK and the US. Market definition for hospitals: Australia, Bulgaria, Canada, China, Czech Republic, Denmark, Finland, Germany, Hungary, Italy, Japan, Latvia, Lithuania, New Zealand, Norway, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, the UK and the US.
NOVO NORDISK ANNUAL REPORT 2012
Team Novo Nordisk is a global sports team with more than 100 cyclists, triathletes and runners who all have diabetes. The team is spearheaded by the world’s first all-diabetes pro-cycling team.
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Headquarters
Investor
Service |
Shareholders’ enquiries concerning dividend payments and shareholder accounts should be addressed to: shareholder@novonordisk.com ADR holders’ enquiries concerning dividend payments, transfer of ADR certificates, consolidation of accounts and tracking of ADRs should be addressed to: JP
Morgan Chase & Co |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.
| Date: FEBRUARY 5, 2013 |
NOVO NORDISK A/S Lars Rebien Sørensen, President and Chief Executive Officer |