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 14, 2011
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-_____________________
Financial, social and environmental performance
Key
figures
2010
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2010
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2009
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Change
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| Financial performance | ||||||||
| Sales total |
DKK
million
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60,776 | 51,078 | 19.0% | ||||
| Diabetes care |
DKK
million
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45,710 | 37,502 | 21.9% | ||||
| – of which modern insulins |
DKK
million
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26,601 | 21,471 | 23.9% | ||||
| Biopharmaceuticals |
DKK
million
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15,066 | 13,576 | 11.0% | ||||
| Gross profit |
DKK
million
|
49,096 | 40,640 | 20.8% | ||||
| Gross margin |
%
of sales
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80.8 | 79.6 | |||||
| Sales and distribution costs |
%
of sales
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29.9 | 30.2 | |||||
| Research and development costs |
%
of sales
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15.8 | 15.4 | |||||
| Administrative expenses |
%
of sales
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5.0 | 5.4 | |||||
| Operating profit |
DKK
million
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18,891 | 14,933 | 26.5% | ||||
| Net profit |
DKK
million
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14,403 | 10,768 | 33.8% | ||||
| Effective tax rate | % | 21.2 | 23.0 | |||||
| Capital expenditure, net | DKK million | 3,308 | 2,631 | 25.7% | ||||
| Return on equity (ROE) | % | 39.6 | 31.3 | |||||
| Free cash flow | DKK million | 17,013 | 12,332 | 38.0% | ||||
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| Long-term financial targets | ||||||||
| Operating profit growth | % | 26.5 | 20.7 | |||||
| Operating profit margin | % | 31.1 | 29.2 | |||||
| Return on invested capital (ROIC) | % | 63.6 | 47.3 | |||||
| Return on invested capital (ROIC) excl non-recurring impact | ||||||||
| from divestment of ZymoGenetics, Inc. in 2010 | % | 62.4 | 47.3 | |||||
| Cash to earnings (three-year average) | % | 115.6 | 111.5 | |||||
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| Non-financial performance | ||||||||
| Donations | DKK million | 84 | 83 | 1.2% | ||||
| Least developed countries where Novo Nordisk | ||||||||
| sells insulin according to the differential pricing policy1 | % | 67 | 73 | |||||
| New patent families (first filings) | Number | 62 | 55 | 12.7% | ||||
| Employees (total) | Number | 30,483 | 29,329 | 3.9% | ||||
| Employee turnover | % | 9.1 | 8.3 | |||||
| Energy consumption | 1,000 GJ | 2,234 | 2,246 | (0.5)% | ||||
| Total waste | Tons | 20,565 | 21,019 | (2.2)% | ||||
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| Non-financial targets | ||||||||
| Maintain a level of engaging culture of 4.0 or above up to 20142 | Scale 1–5 | 4.3 | 4.3 | |||||
| Diversity in all 28 senior management teams by 20143 | % | 54 | 50 | |||||
| Water consumption: 11% reduction by 2011 compared to 2007 | % | (37 | ) | (34 | ) | |||
| CO2 emissions: 10% reduction by 2014 compared to 2004 | % | (55 | ) | (31 | ) | |||
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| Share performance | ||||||||
| Diluted earnings per share/ADR | DKK | 24.60 | 17.82 | 38.0% | ||||
| Dividend per share (proposed) | DKK | 10.00 | 7.50 | 33.3% | ||||
| Closing share price (B shares) | DKK | 629 | 332 | 89.5% | ||||
| Market capitalisation (B shares)4 | DKK billion | 292 | 159 | 83.7% | ||||
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| 1. | Novo Nordisk offers insulin at a price not exceeding 20% of the average western world price to least developed countries as defined by the United Nations. |
| 2. | Based on eVoice, an employee survey using a scale of 1–5, with 5 being the best. |
| 3. | Diverse in gender and nationality. |
| 4. | Novo Nordisk B shares (excluding treasury shares). |
| See more financial and non-financial highlights and non-financial targets on pp 14–15. | |
For nearly 90 years, Novo Nordisk has combined drug discovery with technology to turn science into solutions for people with diabetes. We also provide treatments for people with haemophilia and growth hormone deficiency and for women experiencing the symptoms of menopause. We leverage our expertise with protein molecules, chronic disease management and device technology to provide innovative treatments that make a difference in quality of care.
Novo Nordisk has more than 30,000 employees in 74 countries and markets products in about 180 countries. Our B shares are listed on NASDAQ OMX Copenhagen and our ADRs are listed on the New York Stock Exchange under the symbol NVO. For more information about our company, visit novonordisk.com.
Since 2004, we have reported on financial, social and environmental performance in one integrated report, with both financial and non-financial statements. We report additional information online.1 The most material and business critical information is reported in the annual report. Information for specific stakeholder groups is reported at annualreport2010.novonordisk.com. We value feedback and welcome questions or comments about this report or our performance at annualreport@novonordisk.com.
| 1 | This public filing contains references and links to information posted on the company’s website; such information is not incorporated by reference into the public filing. |
Novo Nordisk Annual Report 2010 1
| 2010 accomplishments and results |
Sten
Scheibye
Chairman
of the Board of Directors
The world economy was on the mend in 2010. Much of the rebound has been due to strong fiscal stimulus provided by governments, which has put pressure on public budgets, particularly in Europe and the US. This may in due course put further pressure on the already strained healthcare environment in these parts of the world. Economic growth has been maintained in emerging markets, and many of these countries are investing in improved services, including healthcare.
As part of the global response to the recent financial crisis, efforts have been made to improve corporate governance systems and make companies more transparent. In Denmark, new corporate governance recommendations were introduced in early 2010. While Novo Nordisk’s practices are in accordance with the majority of the new recommendations, the company’s remuneration principles have been revised to ensure that long-term management incentives and shareholder interests remain aligned, and these will be presented to the 2011 Annual General Meeting for approval. The proposed remuneration principles include incentive guidelines and introduce claw-back provisions allowing Novo Nordisk to recover variable remuneration paid on the basis of data that is subsequently determined to be misstated.
The Board of Directors oversees the strategic direction of the company, and in this capacity we have approved new long-term financial targets. The business and competitive environment has been quite favourable for Novo Nordisk recently, as have exchange rates, allowing the company to achieve the previous targets in an unusually short time frame.
In recognition of Novo Nordisk’s strong balance sheet, sustainable significant cash flow and the Board’s confidence in the strategic direction and long-term prospects for the business, we have consistently increased the dividend paid over the last five years. During 2010, dividends paid to Novo Nordisk shareholders increased by 25% to 7.50 Danish kroner per share. The proposed dividend for 2011 is up 33% to 10.00 Danish kroner per share. Also in 2010 Novo Nordisk repurchased shares worth 9.5 billion Danish kroner in 2010, helped by the 1.1 billion kroner profit from sale of shares in ZymoGenetics, Inc. In continuation of this, Novo Nordisk intends to buy back 10 billion kroner worth of shares in 2011.
As Novo Nordisk marks its 10th year as a focused pharmaceutical company, the Board would like to express its appreciation of the leadership shown by President and CEO Lars Rebien Sørensen and the Executive Management team. On behalf of the Board, I would also like to thank all Novo Nordisk employees around the world for their contribution to what has been an outstanding year.
Sten
Scheibye
Chairman
of the Board of Directors
2 Novo Nordisk Annual Report 2010
| 2010 accomplishments and results |
Lars
Rebien Sørensen
President
and chief executive officer
Novo Nordisk continued to deliver on our commitment to improve the lives of people with diabetes and other chronic diseases during 2010, with very positive performance for the year.
We achieved the long-term financial targets we set in our 2008 Annual Report with growth in operating profit of 27%. Sales increased by 19% in Danish kroner and 13% measured in local currencies. Our diabetes care sales increased 22% in 2010, while sales of our biopharmaceutical products increased 11%, both measured in kroner.
Uncertainties in early 2010, such as the pending approval of Victoza® and the potential for generic competition to our oral antidiabetic agent Prandin® in the US, made us cautious from the beginning of the year. Victoza® was approved in the US in January 2010 and the launch came off to a very good start, while Prandin® remained uncontested in the US throughout the year. This, combined with our strong business performance, allowed us to exceed our expectations for 2010.
We saw tremendous progress in 2010 in our development pipeline, with positive results from phase 3 trials for our next-generation insulins, Degludec (insulin degludec) and DegludecPlus (insulin degludec/insulin aspart). We also achieved significant milestones
related to the development of innovative new treatments for haemophilia, and continued our build-up of a robust pipeline of therapies for chronic inflammatory diseases.
As the global leader in diabetes care, with 51% of the insulin market measured by volume, the success of our core business is linked to innovations and improvements in global diabetes care.
| • | Our strong sales growth has been driven by sales of our modern insulins, particularly in North America and our International Operations region, and by Victoza®. |
| • | Modern insulins accounted for close to 70% of our total insulin sales in 2010. These therapies have the potential to improve glucose control compared with human insulins, lowering the risk of hypoglycemia. |
| • | Victoza®, our new Glucagon-Like Peptide-1 treatment, which is an analogue of the naturally occurring hormone involved in glucose regulation, has expanded the market for GLP-1 treatment. Victoza® is used for treating type 2 diabetes when oral antidiabetic therapy will no longer suffice, offering another option for managing this progressive disease at early stages. |
| • | We have continued our efforts to improve access to care throughout the world, donating a portion of income from our net insulin sales to the World Diabetes Foundation and supporting improvements in the ability of healthcare systems to diagnose and treat diabetes. |
| • | As part of our Changing Diabetes® in Children programme, we established 13 new clinics to improve diagnosis and treatment of children with type 1 diabetes in developing countries. |
Our manufacturing organisation reached a very ambitious milestone, increasing productivity to the extent that our cost of goods sold in 2010 fell to less than 20% of the sales volume. As the efficiency
Novo Nordisk Annual Report 2010 3
| 2010 accomplishments and results |
of our production activities has increased, we have also reduced our environmental impact. We reduced energy and water consumed for production activities during the year and CO2 emissions from energy consumption fell 35% compared with 2009 levels.
Pursuing
new ambitions
Ten years
ago, when I was first appointed CEO, I went on an educational journey to study
what our customers, employees and other stakeholders expected from our company.
This led to the establishment of our values-based management system called
the Novo Nordisk Way of Management.
I made this journey again in 2010 and was pleased to find that despite having tripled our workforce and sales and becoming a much more global business over the past decade, the values expressed in the Novo Nordisk Way of Management are more ingrained than ever. In the words of our people, we are continuing to manage our business in a responsible and sustainable way, with a focus not only on improving the company’s finances but also on improving our social and environmental performance.
Part of the Novo Nordisk Way of Management framework has been our vision to become the world’s leading diabetes care company. I am proud to report that we have realised this vision and are introducing a new set of milestones reflecting the challenges of the next decade. As part of our 2010 update of what is now called the Novo Nordisk Way, we are now focusing on strengthening our leadership in diabetes and aspiring to change possibilities in haemophilia and other serious chronic conditions where we can make a difference.
What has not changed is our dedication to achieving good business results in a responsible way. Our newly updated values-based management system holds all employees accountable for working in accordance with our principles and provides concise, clear guidance on how we work. The update is the outcome of an extensive, inclusive process involving consultation of employees from all over the world, patient organisations, healthcare providers and other stakeholders.
Preparing
for future growth
In 2011,
we will work to solidify our leadership in diabetes care and expand into new
markets and therapy areas. Our future success will depend on our performance
in a number of key areas:
| • | We expect to file for regulatory approval of Degludec (insulin degludec) and DegludecPlus (insulin degludec/insulin aspart) this year. |
| • | We are exploring entry into the obesity market, following the first phase 3 clinical results for liraglutide in obesity, which demonstrated weight loss in people with severe obesity and other co-morbidities. |
| • | We will initiate phase 3 trials for a fixed combination of Degludec (insulin degludec) and Victoza® which may offer the benefits of both compounds in a fixed, convenient solution. |
| • | We will initiate the final clinical and regulatory studies for a new recombinant factor VIIa analogue to treat people with haemophilia who have developed inhibitors. This new analogue offers the possibility of forming even stronger clots in less time. |
| • | We are anticipating a continued successful roll-out of Victoza® worldwide as well as continued market penetration of our portfolio of modern insulins. |
| • | Finally, we will continue to pursue further productivity improvements throughout our organisation. |
Succeeding in these areas requires that we attract, retain and engage the most talented people to support global growth and as well as continuously improving our ability to manage innovation.
I want to thank everyone at Novo Nordisk for their contributions to our success. With the capabilities of our talented employees around the world, I believe 2011 will be yet another successful year for Novo Nordisk, one with significant growth and continued innovation for the benefit of all of our stakeholders.
Lars
Rebien Sørensen
President
and chief executive officer
4 Novo Nordisk Annual Report 2010
| 2010 accomplishments and results |
 |
Valuing
therapeutic innovation |
Interview
with Lars Rebien Sørensen,
Novo Nordisk’s chief executive officer
What
are the benefits of therapeutic innovations?
The research-based
pharmaceutical industry’s continued efforts to discover new therapeutic
offers are intended to benefit patients as well as society. In our field of
business, we have seen how treatment of diabetes has improved dramatically
since insulin was discovered nearly 90 years ago. Through a combination of
incremental development and more radical breakthroughs, significant improvements
have been achieved over just one generation, enabling people with diabetes
to lead their lives in full and achieve a normal life expectancy.
Improvements have been made possible because products were priced in a way that allows for reinvestment into research in new products. Our modern insulins are now widely available, and the improvements they entail will have a cumulative impact on chronic disease treatment over decades. In our view, innovations will eventually benefit all people with diabetes.
Our diabetes care portfolio today includes human insulins as well as modern insulins, which makes it possible for Novo Nordisk to offer life-saving treatments at affordable prices and continue to improve treatment regimes that meet individual needs. Our goal is to develop the best diabetes care portfolio for healthcare systems in all parts of the world.
What
do you consider to be reasonable price levels for new pharmaceutical products?
The price
of a new therapeutic treatment reflects the clinical benefit as well as the
societal value of the therapeutic innovation, but also takes into account
the cost of innovation. If pharmaceutical companies cannot recoup their investments
in research and development, the business of pharmaceutical innovation will
not be sustainable. And in the long run it would be patients who would pay
the price.
To conduct business responsibly, we have to be profitable and provide economically viable solutions. For example, Novo Nordisk’s newest product, Victoza®, was in development for nearly two decades. When planning development projects, we know we must finance larger and more complex trials over longer and longer trial periods before we can hope to receive product approval.
How
should innovation be valued?
Ideally,
a product would be priced on the basis of an assessment of its benefits in
a real world setting. Today, this is not the case. It is difficult to get
sufficient information about the relative treatment benefit before a new product
is launched. Allowing for conditional pricing when new products are launched
would be an option to ensure that the price is right based on clinical utility
and benefits to the patients. In such a pricing model, prices for new therapies
could be
subsequently increased or decreased based on efficacy when compared with other treatment options.
What
role does pricing play for Novo Nordisk in terms of ensuring availability
of treatment?
When looking
at the full impact of diabetes on healthcare budgets, the price of diabetes
treatment is a fraction of that. The most costly part of diabetes lies with
the late-stage complications that require hospitalisation, costly interventions
and leave people incapacitated for longer periods of time. That said, we do
recognise that availability and affordability of medicines are preconditions
for expanding access to health care. Our premise is that access to essential
medicines is a human right, and we acknowledge our responsibility in addressing
the barriers for proper diagnosis, treatment and care.
In the world’s poorest countries, as defined by the United Nations, we sell human insulin through our long-standing differential pricing policy, offering products at a price not more than 20% of the average prices in the western world.
In other countries, we market the full Novo Nordisk portfolio of insulins with the goal of reaching the majority of patients with diabetes with a product mix of human and modern insulins and a range of devices to suit the affordability levels of both public and private customers as well as patients who may pay out of pocket.
Why
does Novo Nordisk remove products from the market?
We make
every effort to ensure that life-saving medicines are available to patients.
This year, as several governments in Europe mandated price cuts to address
their economic problems, we faced dilemmas between operating profitably and
continuing to serve people who rely on our products.
In May 2010, the Greek government announced temporary price cuts of up to 27%. As a consequence, we made a decision to temporarily withdraw some products from the Greek market, but we continued to offer human insulin in vials.
In a situation like this, there is a major dilemma for a company like ours. The proposed price reductions for patented products would not have allowed us to continue running a profitable business in Greece. In the long term, if we cannot maintain profitability, we will be unable to continue to provide and improve treatment for the people who most need it. While pricing issues remain unresolved in Greece, we have been able to continue to offer our broad portfolio of products, including modern insulins, with Penfill® cartridges in the NovoPen® 4 device.
How
should governments assess the value of treatment?
We understand
the budget constraints governments are facing. Medical costs can be an easy
target in times of tough political choices. While there may be short-term
savings, the cost to society can be greater over a longer time frame. The
cost of treatment is usually a small fraction of overall spending on diabetes
care, with most spending allocated to treat serious complications related
to inadequate medical care. In the US and Europe, for instance, insulin accounts
for 3% of the total costs associated with treating diabetes.
Novo Nordisk Annual Report 2010 5
| 2010 accomplishments and results |
6 Novo Nordisk Annual Report 2010
| 2010 accomplishments and results |
|
Japan
& Korea Victoza®
(GLP-1 therapy for type 2 diabetes) NovoNorm®/Prandin®/PrandiMet®
|
Biopharmaceuticals
NovoSeven®
(Bleeding disorders therapy) Norditropin®
(Growth hormone therapy) Other
products Development
in cost In 2010, total non-production-related costs increased by 18% to DKK 30,862 million and by 14% in local currencies compared with 2009. Sales and distribution costs increased by 18% to DKK 18,195 million, primarily reflecting the launch costs of Victoza® in Europe and the US, as well as a continued expansion of the field sales forces in Europe, Japan, China and the US, and an increase in the provision level for legal cases. Research and development costs increased by 22% to DKK 9,602 million, primarily reflecting the ongoing phase 3 programme for the company’s next generation of insulins, Degludec1 (insulin degludec) and DegludecPlus2 (insulin degludec/insulin aspart). Licence fees and other operating income constituted DKK 657 million in 2010 compared with DKK 341 million in 2009. This development primarily reflects a sustainable higher level of licence fees as well as non-recurring income of approximately DKK 100 million related to a patent settlement during the first quarter of 2010. Operating profit in 2010 increased by 27% to DKK 18,891 million compared with 2009. In local currencies the growth was approximately 16%. 1. Internal
designation for insulin degludec. |
Novo Nordisk Annual Report 2010 7
| 2010 accomplishments and results |
|
Net
financials and tax Also included in net financials is the result from associated companies with an income of DKK 1,070 million. In 2009, the result from associated companies was an expense of DKK 55 million. In the fourth quarter of 2010, Novo Nordisk recorded non-recurring income of approximately DKK 1.1 billion from the sale of shares in ZymoGenetics, Inc. as announced on 8 October 2010. The realised effective tax rate for 2010 was 21.2%. The effective tax rate for 2010 is lowered by a non-recurring effect of approximately 1.5 percentage points from the divestment of Novo Nordisk’s ownership share of ZymoGenetics, Inc., the income from which is exempt from tax charges under applicable Danish tax laws. Capital
expenditure Free cash flow for 2010 was DKK 17.0 billion compared with DKK 12.3 billion in 2009. The higher cash flow is driven by higher operating profit and the non-recurring proceeds from the divestment of ZymoGenetics, Inc. |
Equity Treasury
shares and 2010 Employee
share programmes in 2010 Furthermore, approximately 15,000 international employees have been awarded approximately 273,000 stock options in 2010, and the cost of these, DKK 150 million, will be amortised over a 3-year vesting period. Holding
of treasury shares In order to maintain capital structure flexibility, the Board of Directors at the Annual General Meeting in 2011 will propose a reduction in the B share capital from DKK 492,512,800 to DKK 472,512,800 by cancelling 20,000,000 B shares of DKK 1 from the company’s own holding of B shares at a nominal value of DKK 20,000,000, equivalent to 3.3% of the total share capital. After implementation of the share capital reduction, the company’s share capital will amount to DKK 580,000,000 divided into an A share capital of DKK 107,487,200 and a B share capital of DKK 472,512,800. Proposed
dividend and 2011 The Board of Directors has approved a new DKK 10 billion share repurchase programme to be executed during 2011. Novo Nordisk will initiate its share repurchase programme in accordance with the provisions of the European Commission’s Regulation No. 2273/2003 of 22 December 2003 (The Safe Harbour Regulation). For that purpose Novo Nordisk has appointed J.P. Morgan Securities Ltd. as lead manager to execute a part of its share repurchase programme independently and without influence from Novo Nordisk. The purpose of the programme is to reduce the company’s share capital. Under the agreement, J.P. Morgan Securities Ltd. will repurchase shares on behalf of Novo Nordisk for an amount of up to DKK 2.0 |
8 Novo Nordisk Annual Report 2010
| 2010 accomplishments and results |
|
billion during the trading period starting 2 February and ending on 26 April 2011. A maximum of 155,151 shares can be bought during one single trading day, equal to 20% of the average daily trading volume of Novo Nordisk B shares on NASDAQ OMX Copenhagen during the month of January 2011, and a maximum of 8,843,607 shares in total can be bought during the trading period. At least once every seven trading days, Novo Nordisk will issue an announcement in respect of the transactions made under the repurchase programme. Non-financial
The company’s long-term non-financial targets support efforts to maximise positive social impact by improving access to and quality of care, attracting and retaining employees and effectively managing resources to minimise environmental impacts. Adoption of our long-established differential pricing policy, a measure of our progress to expand access to diabetes care, continued. During 2010, we met non-financial targets related to employee engagement and adherence to the Novo Nordisk Way and made progress towards the target of diversity in all senior management teams. Performance on environmental dimensions improved and we successfully exceeded targets for reduction of energy consumption, water con sumption and CO2 emissions. Social Patients Access
to care Novo Nordisk also supports the Novo Nordisk Haemophilia Foundation, established in 2005. In 2010, we donated DKK 15 million. For more information on the foundations, see pp 32 and 38. Pricing |
20% of the average prices in the western world, in 67% or 33 of 49 least developed countries during 2010. Capacity
building In addition to enrolling about 800 children with type 1 diabetes in our Changing Diabetes® in Children programme during 2010, taking the total to more than 1,300, we trained about 100 health-care providers and established 13 clinics. The programme supports diagnosis and treatment of children in developing countries, par ti cularly in sub-Saharan Africa. Employees Engagement Diversity At the end of 2010, diversity in terms of gender and nationality was reflected in 54% of the 28 senior management teams, compared with 50% at the end of 2009. While we have chosen to report on our progress annually, changing our organisational culture is a long-term objective that involves training and mentoring, talent management and succession planning. |
Novo Nordisk Annual Report 2010 9
| 2010 accomplishments and results |
|
As a large employer in Denmark, Novo Nordisk has subscribed to the Ministry of Equality's recommendations for more women on supervisory boards. The company is thus committed to targeted efforts to develop and recruit female managers. Health
and safety Assurance In 2010, Novo Nordisk had four instances of product recalls from the market, compared with two recalls in 2009. Recalls during 2010 were for Norditropin NordiFlex® 15 mg (Switzerland), Mixtard® 30 InnoLet® 100 IU/ml (several countries), and two separate recalls of our emergency kit for treating severe hypoglycaemia, GlucaGen® Hypokit (Canada, New Zealand and Denmark). We cooperated with local health authorities to ensure appropriate information was pro vided to pharmacies, medical practitioners and patients. Values From 1 October 2009 to 30 September 2010, 58 facilitations were conducted at unit level, covering more than 12,000 employees. More than 2,800 employees were interviewed to determine how corporate values are being complied with throughout the organisation. To maintain a high level of compliance, 225 findings were issued during the 2010 facilitation year. Business
ethics Business ethics audits are conducted using a risk-based approach, with on-site interviews and documentation reviews to assess compliance with Novo Nordisk’s business ethics procedures. During 2010, 35 business ethics audits were conducted and 200 findings were issued and agreed with local management. Our employees have an obligation to report any instances of suspected misconduct. This obligation can be met by reporting to a manager or company legal counsel. Novo Nordisk also provides the option to report suspected business ethics misconduct anonymously through a compliance hotline monitored by the Audit Committee. During 2010, 15 cases of suspected business ethics misconduct were reported through the compliance hotline. These have been investigated and three of them have been substantiated |
and have been determined to have no material impact for Novo Nordisk. Consequences for employees involved in substantiated cases ranged from counselling and training to written warnings and have been determined to have no material impact for Novo Nordisk. Supplier
audits Environment Water and energy consumption for production decreased in 2010 by 37% and 20% respectively compared with the 2007 baseline. These reductions surpassed the long-term targets of 11% reductions in both areas by 2011 compared to 2007. Consumption decreases were mainly due to optimisations in insulin bulk production in Denmark. Energy and water-saving projects at many other sites also contributed. The total volume of waste decreased 2% to 20,565 tons in 2010 from 21,019 tons in 2009, while the percentage of recycled waste remained stable at 50%. The decrease in waste was primarily due to a 12% reduction in hazardous waste disposal. While sales and production increased in 2010, CO2 emissions related to production fell by 35% compared with 2009 levels. This was due to the full conversion to renewable power supplies for Danish operations, including energy-intensive insulin production, and increased energy efficiency in all production facilities globally. |
10 Novo Nordisk Annual Report 2010
| 2010 accomplishments and results |
The current expectations for 2011 are summarised in the table below:
|
|
|
| Expectations are as reported, if not otherwise stated |
Current
expectations 2 February 2011
|
|
|
|
| Sales growth | |
| • in local currencies |
8–10%
|
| • as reported |
Around
1.5 percentage points lower
|
| Operating profit growth | |
| • in local currencies |
Around
15%
|
| • as reported |
Around
2.5 percentage points lower
|
| Net financials |
Expense
of around DKK 100 million
|
| Effective tax rate |
Around
23%
|
| Capital expenditure |
Around
DKK 3.5 billion
|
| Depreciation, amortisation and impairment losses |
Around
DKK 2.7 billion
|
| Free cash flow |
More
than DKK 16 billion
|
|
|
|
Novo Nordisk expects sales growth in 2011 of 8–10% measured in local currencies. This is based on expectations of continued market penetration for Novo Nordisk’s key products, as well as expectations of continued intense competition, generic competition to oral antidiabetic products, and an impact from the implementation of healthcare reforms primarily in the US and Europe. Given the current level of exchange rates versus Danish kroner, the reported sales growth is expected to be around 1.5 percentage points lower than growth measured in local currencies.
For 2011, growth in operating profit is expected to be around 15% measured in local currencies. Given the current level of exchange rates versus Danish kroner, the reported operating profit growth is expected to be 2.5 percentage points lower than growth measured in local currencies.
For 2011, Novo Nordisk expects a net financial expense of around DKK 100 million. The current expectation reflects that the impact of currency hedging contracts is approximately neutral.
The effective tax rate for 2011 is expected to be around 23%.
Capital expenditure is expected to be around DKK 3.5 billion in 2011, primarily related to investments in the new insulin formulation and filling plant in China and a new prefilled device production facility in Denmark. Expectations for depreciation, amortisation and impairment losses are around DKK 2.7 billion whereas free cash flow is expected to be more than DKK 16 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 the remainder of 2011 and that currency exchange rates, especially the US dollar, will remain at the current level versus the Danish krone during the remainder of 2011.
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 |
Annual
impact on Novo Nordisk’s
|
Hedging
|
| invoicing |
operating
profit of a 5%
|
period
|
| currency |
movement
in currency
|
(months)
|
|
|
|
|
| USD |
DKK
620 million
|
15
|
| JPY |
DKK
155 million
|
13
|
| CNY |
DKK
120 million
|
12*
|
| GBP |
DKK
85 million
|
10
|
| * USD used as proxy when hedging Novo Nordisk’s CNY currency exposure. | ||
|
|
|
|
The financial impact from foreign exchange hedging is included in ‘Net financials’.
Forward-looking
statements
Novo
Nordisk’s reports filed with or furnished to the US Securities and Exchange
Commission (SEC), including this document and Form 20-F, both expected to
be filed with the SEC in February 2011, 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 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 cooperations in relation thereto |
| • | statements containing projections of or targets for revenues, income (or loss), earnings per share, capital expenditures, dividends, capital structure or other net financials |
| • | 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 headings ‘Performance in 2010’, ‘Outlook 2011’, ‘Managing performance using long-term targets’ ‘Strategic focus areas’ 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 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 on pp 43–45.
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 2010 11
| 2010 accomplishments and results |
|
|
Managing
performance using long-term targets |
Interview
with Jesper Brandgaard,
Novo Nordisk’s chief financial officer
How
does Novo Nordisk use long-term
financial targets to manage the business?
The
long-term financial targets are set based on a continuation of the current organic
growth strategy and the current scope of activities. The targets help management
establish a balance between growing the business profitably in the near term
while ensuring we are able to make investments to support long-term growth.
When Novo Nordisk sets long-term targets, we have a clearly defined ambition
and a plan to achieve them.
Every year, interim targets for the long-term targets are included in the company’s Balanced Scorecard and cascaded to relevant parts of the business. The interim targets are set based on prior-year performance, the prevailing currency and competitive environment.
It is also important that our activities result in cash generation, a portion of which can be returned to shareholders as dividends.
How
long has Novo Nordisk used long-term financial targets?
Financial
targets, including the 15% growth target for operating profit, were introduced
in 1996. The growth target for operating profit has been viewed as the cornerstone
financial target from the beginning. In 1996, the target for free cash flow
was ‘only’ to have positive cash flow, reflecting how investment-intensive
the business was at that point in time.
The first long-term targets for Novo Nordisk in its current structure were announced in 2001. Despite a very tough year in 2002, including a profit warning and the termination of clinical development of a key late-stage project, we achieved the targets in 2005 and announced new targets. At that time, it was clear that the growth rate of the overall pharmaceutical industry was declining. We decided to retain our growth target for operating profit, which has been viewed as increasingly ambitious over time.
What
are the key contributors to the company’s
strong performance against financial targets?
Over
the past five years, two things have had a substantial impact on our financial
performance. First, there has been a very steady positive development in our
overall production economy. By producing more in existing facilities without
expanding capacity, we have been able to reduce costs and defer investments,
which has also helped to improve our cash flows.
Second, Novo Nordisk has been especially successful in the US over the past five years. Due to trading and rebate conditions, funding requirements for growing our US business are lower than in many other countries. By contrast, in many parts of the world, accounts receivable from wholesalers may take up to three months to be paid. The lower level of invested capital required for expanding our business in the US has had a positive effect on the company’s overall return on invested capital.
How
is Novo Nordisk changing
its long-term financial targets?
The
company’s 15% growth in operating profit target has become ever more ambitious
in the current pharmaceutical environment. We believe that continuing to pursue
this very challenging target shows that Novo Nordisk is striving to be among
the best in the industry.
The target level for operating margin has been increased from 30% to 35%. The increase reflects our expectation of continued improvement in efficiencies from our manufacturing facilities around the world and longer-term in the productivity of our global sales force, which is approaching critical mass in terms of scale in many countries. Over the last 10 years, we have also made significant improvements in the ratio of our administration costs to sales, from 8% in 2001 to 5% today, and this will continue with a smaller relative improvement. It should be noted that the achievement of the operating margin target may be influenced by significant changes in market conditions, including regulatory developments, changes in pricing environment, healthcare reforms and exchange rate movements.
| The four targets provide a guide to the level of growth, profitability and return to which we aspire. | |
The target level for return on invested capital measured post tax has been increased from 50% to 70%. The raised target reflects the expectation of continued lower growth in invested capital relative to operating profit as well as a stable effective tax rate. In setting the new target level Novo Nordisk has assumed that the proposed accounting rules regarding treatment of operating leases will be implemented. It is currently anticipated that the introduction of this new accounting standard will have a negative effect on return on invested capital by approximately 10 percentage points.
The target level for the cash-to-earnings ratio has been increased from 80% to 90%, reflecting a sustained lower tangible investment level and an improved cash conversion ability. As previously, this target will be pursued looking at the average over a three-year period.
What
is the time frame for the targets?
We
establish long-term targets with the ambition of achievement in a 4–5-year
time horizon. If the business environment and competitive environment turn out
to be favourable, then we may achieve targets earlier. That has been the case
recently; currencies and the competitive environment have been more favourable
than we envisioned in 2008. But the opposite may also happen, leading to delays
in achieving the targets.
12 Novo Nordisk Annual Report 2010
| 2010 accomplishments and results |
Are
Novo Nordisk’s targets ambitious?
When
we set targets in our 2008 Annual Report, they certainly felt ambitious. For
instance, we increased our long-term target for return on invested capital by
quite a bit in 2008, from 30% to 50%.
It might appear, based on recent performance, that the current cash-to-earnings target is somewhat conservative. If you look at our history of working with this target, which is measured on a three-year rolling average, we initially struggled to meet it because of our heavy investments in insulin production. It is also a target that, in a single year, may be very sensitive to external factors beyond Novo Nordisk's control.
How
do the company’s long-term financial
targets tie to the Novo Nordisk Way?
We
believe that the only way we can run a sustainable business is to generate strong
results on multiple dimensions. Growing our business profitably and delivering
competitive results is the basis of our ability to help patients live better
lives, offer an attractive return to our shareholders and serve all of our stakeholders.
What
are the uncertainties in achieving the new targets?
Exchange
rates are always an unknown variable for a global business. Regulatory approval
of development projects, particularly Degludec and DegludecPlus, is critical
to achieving our ambitious targets. Price pressures from healthcare reforms
in many parts of the world will also have an impact, notably in Europe, some
emerging markets and the US. The full effect of the implementation of the
US healthcare reform will only become apparent over the next few years. We
expect competition to increase, and this includes biosimilar competition to
our existing products, and this could have an impact.
I would also like to stress that the long-term targets are set given the current scope of activities. If strategic opportunities arise that require us to act, it could impact our ability to meet the targets. Should this situation materialise, we may have to adjust the targets. The long-term targets should not prevent Novo Nordisk from pursuing initiatives which will improve our long-term competitive situation.
Results
compared with
long-term financial targets
|
|
|
|
Ratio
|
New
target
|
|
|
|
|
Growth
in operating profit
|
15%
|
|
Operating
margin
|
35%
|
|
Return
on invested capital (ROIC)
|
70%
|
|
Cash
to earnings (three-year average)
|
90%
|
|
|
|
Novo Nordisk Annual Report 2010 13
| 2010 accomplishments and results |
|
DKK
million
|
2006
|
2007
|
2008
|
2009
|
2010
|
2009–2010
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales | Change | |||||||||||
| Modern insulin (insulin analogues) | 10,825 | 14,008 | 17,317 | 21,471 | 26,601 | 23.9% | ||||||
| Human insulin | 13,451 | 12,572 | 11,804 | 11,315 | 11,827 | 4.5% | ||||||
| Victoza® | – | – | – | 87 | 2,317 | N/A | ||||||
| Protein-related products | 1,606 | 1,749 | 1,844 | 1,977 | 2,214 | 12.0% | ||||||
| Oral antidiabetic products (OAD) | 1,984 | 2,149 | 2,391 | 2,652 | 2,751 | 3.7% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diabetes care total | 27,866 | 30,478 | 33,356 | 37,502 | 45,710 | 21.9% | ||||||
| NovoSeven® | 5,635 | 5,865 | 6,396 | 7,072 | 8,030 | 13.5% | ||||||
| Norditropin® | 3,309 | 3,511 | 3,865 | 4,401 | 4,803 | 9.1% | ||||||
| Hormone replacement therapy | 1,607 | 1,668 | 1,612 | 1,744 | 1,892 | 8.5% | ||||||
| Other products | 326 | 309 | 324 | 359 | 341 | (5.0% | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Biopharmaceuticals total | 10,877 | 11,353 | 12,197 | 13,576 | 15,066 | 11.0% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales by business segment | 38,743 | 41,831 | 45,553 | 51,078 | 60,776 | 19.0% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America | 12,280 | 13,746 | 15,154 | 18,279 | 23,609 | 29.2% | ||||||
| Europe | 15,300 | 16,350 | 17,219 | 17,540 | 18,664 | 6.4% | ||||||
| International Operations1 | 7,156 | 7,892 | 8,984 | 10,371 | 12,843 | 23.8% | ||||||
| – of which Region China | 1,546 | 2,022 | 2,631 | 3,536 | 4,508 | 27.5% | ||||||
| Japan & Korea1 | 4,007 | 3,843 | 4,196 | 4,888 | 5,660 | 15.8% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales by geographical segment | 38,743 | 41,831 | 45,553 | 51,078 | 60,776 | 19.0% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Increase in local currencies | 16% | 13% | 12% | 11% | 13% | |||||||
| Currency effect (local currency impact) | (1% | ) | (5% | ) | (3% | ) | 1% | 6% | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total sales increase as reported | 15% | 8% | 9% | 12% | 19% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financial performance | ||||||||||||
| Depreciation, amortisation and impairment losses | 2,142 | 3,007 | 2,442 | 2,551 | 2,467 | (3.3% | ) | |||||
| Operating profit | 9,119 | 8,942 | 12,373 | 14,933 | 18,891 | 26.5% | ||||||
| Net financials | 45 | 2,029 | 322 | (945 | ) | (605 | ) | (36.0% | ) | |||
| Profit before income taxes | 9,164 | 10,971 | 12,695 | 13,988 | 18,286 | 30.7% | ||||||
| Net profit | 6,452 | 8,522 | 9,645 | 10,768 | 14,403 | 33.8% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets | 44,692 | 47,731 | 50,603 | 54,742 | 61,402 | 12.2% | ||||||
| Equity | 30,122 | 32,182 | 32,979 | 35,734 | 36,965 | 3.4% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditure, net | 2,787 | 2,268 | 1,754 | 2,631 | 3,308 | 25.7% | ||||||
| Free cash flow2 | 4,707 | 9,012 | 11,015 | 12,332 | 17,013 | 38.0% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financial ratios | ||||||||||||
| Percentage of sales | ||||||||||||
| Sales outside Denmark | 99.2% | 99.2% | 99.2% | 99.2% | 99.4% | |||||||
| Sales and distribution costs | 30.0% | 29.6% | 28.2% | 30.2% | 29.9% | |||||||
| Research and development costs | 16.3% | 20.4% | 17.2% | 15.4% | 15.8% | |||||||
| Administrative expenses | 6.2% | 6.0% | 5.8% | 5.4% | 5.0% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross margin2 | 75.3% | 76.6% | 77.8% | 79.6% | 80.8% | |||||||
| Net profit margin2 | 16.7% | 20.4% | 21.2% | 21.1% | 23.7% | |||||||
| Effective tax rate2 | 29.6% | 22.3% | 24.0% | 23.0% | 21.2% | |||||||
| Equity ratio2 | 67.4% | 67.4% | 65.2% | 65.3% | 60.2% | |||||||
| Return on equity (ROE)2 | 22.3% | 27.4% | 29.6% | 31.3% | 39.6% | |||||||
| Payout ratio2 | 34.4% | 32.8% | 37.8% | 40.9% | 39.6% | |||||||
| Payout ratio excl non-recurring events3 | 34.4% | 34.9% | 36.6% | 40.9% | 42.8% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term | ||||||||||||
| Ratios for long-term financial targets | financial targets4 | |||||||||||
| Operating profit margin2 | 23.5% | 21.4% | 27.2% | 29.2% | 31.1% | 35% | ||||||
| Operating profit growth | 12.7% | (1.9%) | 38.4% | 20.7% | 26.5% | 15% | ||||||
| Return on invested capital (ROIC)2 | 25.8% | 27.2% | 37.4% | 47.3% | 63.6% | 70% | ||||||
| Return on invested capital (ROIC) | ||||||||||||
| excl non-recurring events3 | 25.8% | 29.9% | 38.4% | 47.3% | 62.4% | |||||||
| Cash to earnings2 | 73.0% | 105.7% | 114.2% | 114.5% | 118.1% | |||||||
| Cash to earnings, three-year average | 80.2% | 87.0% | 97.6% | 111.5% | 115.6% | 90% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share ratios | ||||||||||||
| Basic earnings per share/ADR in DKK2 | 10.05 | 13.49 | 15.66 | 17.97 | 24.81 | |||||||
| Diluted earnings per share/ADR in DKK2 | 10.00 | 13.39 | 15.54 | 17.82 | 24.60 | |||||||
| Dividend per share in DKK | 3.50 | 4.50 | 6.00 | 7.50 | 10.00 | |||||||
| Total dividend | 2,221 | 2,795 | 3,650 | 4,400 | 5,700 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 Novo Nordisk Annual Report 2010
| 2010 accomplishments and results |
|
2006
|
2007
|
2008
|
2009
|
2010
|
2009–2010
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Social performance | Change | |||||||||||
| Patients: | ||||||||||||
| Donations to the World Diabetes Foundation (DKK million) | 62 | 65 | 68 | 68 | 69 | 1.5% | ||||||
| Donations to the Novo Nordisk Haemophilia | ||||||||||||
| Foundation (DKK million) | 15 | 11 | 10 | 15 | 15 | 0% | ||||||
| Healthcare professionals trained or educated in | ||||||||||||
| diabetes (1,000) (accumulated) | 297 | 336 | 380 | 805 | 1,178 | |||||||
| People with diabetes trained (1,000) | – | – | – | 416 | 494 | 18.8% | ||||||
| New patent families (first filings) | 149 | 116 | 71 | 55 | 62 | 12.7% | ||||||
| Employees: | ||||||||||||
| Employees (total) | 23.613 | 26.008 | 27.068 | 29.329 | 30.483 | 3.9% | ||||||
| Employee turnover (%) | 10.0 | 11.6 | 12.1 | 8.3 | 9.1 | |||||||
| Internal assurance and monitoring: | ||||||||||||
| Employees trained in business ethics (%) | – | – | – | – | 98 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term | ||||||||||||
| Ratios for social performance | social targets | |||||||||||
| LDCs where Novo Nordisk sells insulin | ||||||||||||
| according to the differential pricing policy (%)5 | 68 | 72 | 64 | 73 | 67 | 100% | ||||||
| Engaging culture (employee | ||||||||||||
| engagement) on a scale of 1–56 | 4.0 | 4.1 | 4.2 | 4.3 | 4.3 | 4.0 or above | ||||||
| Diverse senior management teams (%)7 | – | – | 43 | 50 | 54 | 100% | ||||||
| Company reputation with external key | Improve | |||||||||||
| stakeholders (on a scale of 0–100)8 | 73.8 | 74.0 | 72.4 | 76.3 | 76.1 | (or maintain) | ||||||
| Warning letters and reinspections | 0 | 0 | 0 | 0 | 0 | 0 | ||||||
| Fulfilment of action points from facilitations | ||||||||||||
| of the Novo Nordisk Way (%) of Management | 88 | 91 | 92 | 93 | 93 | 80% or above | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Environmental performance | Change | |||||||||||
| Inputs: | ||||||||||||
| Energy consumption (1,000 GJ) | 2,712 | 2,784 | 2,533 | 2,246 | 2,234 | (0.5)% | ||||||
| Water consumption (1,000 m3) | 2,995 | 3,231 | 2,684 | 2,149 | 2,047 | (4.7)% | ||||||
| Outputs: | ||||||||||||
| CO2 emissions from energy consumption (1,000 tons) | 229 | 236 | 215 | 146 | 95 | (34.9)% | ||||||
| Wastewater (1,000 m3) | 2,583 | 2,764 | 2,542 | 2,062 | 1,935 | (6.2)% | ||||||
| Waste (tons) | 24,165 | 17,576 | 20,346 | 21,019 | 20,565 | (2.2)% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term | ||||||||||||
| Ratios for environmental performance | environmental targets | |||||||||||
| Energy consumption | ||||||||||||
| (change compared to 2007 in %) | – | – | (9 | ) | (19 | ) | (20 | ) | 11% reduction | |||
| Water consumption | ||||||||||||
| (change compared to 2007 in %) | – | – | (17 | ) | (34 | ) | (37 | ) | 11% reduction | |||
| CO2 emissions from energy consumption | ||||||||||||
| (change compared to 2004 in %) | 9 | 12 | 2 | (31 | ) | (55 | ) | 10% reduction | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | As of 1 January 2010 Korea joined Japan to form Region Japan & Korea, while Australia and New Zealand became part of Region International Operations. The historical figures for 2006–2009 have been restated and are comparable to the 2010 regional setup. |
| 2. | For definitions, please refer to p 92. |
| 3. | Impact of ZymoGenetics, Inc. share divestment, discontinuation of all pulmonary diabetes projects and impact of DAKO A/S share divestment. |
| 4. | The long-term financial targets were updated in February 2011. Please refer to pp 12–13. |
| 5. | Least developed countries, as defined by the UN, where Novo Nordisk sells insulin at or below 20% of the average prices for insulin in the western world. |
| 6. | Based on eVoice, an employee survey using a scale of 1–5, with 5 being the best score. |
| 7. | Diverse in terms of gender and nationality. |
| 8. | Company reputation is measured by an independent external consultancy firm using a scale of 0–100, with 100 being the best score. |
Novo Nordisk Annual Report 2010 15
| Our business |
| Our business |
Novo Nordisk is a focused healthcare company specialising in therapeutic proteins, providing life-saving treatments for people with diabetes and rare bleeding disorders. We also offer treatment for growth hormone deficiency, as well as low-dose hormone replacement therapy products. Finally, we carry out development projects targeting treatment of inflammation and obesity.
Offering treatment for unmet medical needs and improving care for people with chronic disease is what drives our ambition and determines our strategic focus. We seek to leverage our core strengths in protein engineering and chronic disease treatment in areas where we see potential for global market leadership.
We aim to grow our business in ways that are both responsible and sustainable, managing in accordance with the Novo Nordisk Way and the Triple Bottom Line principle. To achieve long-term success we must:
| • | continue to develop and provide innovative treatments and delivery devices |
| • | adapt our business to changes in societies as well as in healthcare systems |
| • | maintain leadership and expand into new markets |
| • | continue to pursue production efficiencies |
| • | recruit, develop and retain talented people to support global growth. |
One of the key differentiators for Novo Nordisk compared with other pharmaceutical companies is that our business is primarily focused on protein engineering, expression and formulation supported by innovative devices that improve treatment convenience and accuracy. Novo Nordisk is at the forefront of innovation in protein expression in yeast, which is used for insulins and GLP-1, E. coli, which are used for growth hormone, as well as mammalian cells, which are used for NovoSeven®.
One of the key differentiators for Novo Nordisk is that our business is primarily focused on protein engineering, expression and formulation.
Diabetes
care: expand leadership
Beginning with the first patients our company treated with insulin in the 1920s, we have been dedicated to continuously improving the safety, efficacy and convenience of diabetes treatment. Today, as the only company with a full portfolio of human and modern insulins, we are uniquely positioned to address the issues at the core of the diabetes pandemic: insulin deficiency and the complexities of treating it. For those millions of people who must live with diabetes, our goal is to offer individualised treatment options so that they can lead their lives in full.
Novo
Nordisk’s corporate strategy
Novo Nordisk Annual Report 2010 17
| Our business |
|
While there is not yet a cure for diabetes or a means of reversing diabetes progression, we are conducting research in cooperation with leading academic centres to tackle the roots of the condition. Through two key projects at our Hagedorn Research Institute for applied research involving stem cell biology and beta cell regeneration, we are making progress towards preventing and ultimately curing diabetes. Hagedorn is a fully integrated part of Novo Nordisk and a market-leading incubator for innovation to change diabetes treatment. In 2010, we instituted a new funding model at Hagedorn to support efforts to identify new biological-based targets that could qualify to enter Novo Nordisk’s diabetes pipeline. We are striving to develop treatments for the full span of a person’s life that are as convenient and safe as possible. We continue to invest in the expansion of insulin innovation leadership with research activities aimed at continuous improvement for all types of insulin. Our leadership position within diabetes care is bolstered by the fact that we are the only company with two next-generation insulins, Degludec and DegludecPlus, in late-stage clinical development. Degludec and DegludecPlus are engineered to be ultra-long acting. Phase 3 results are reported on p 30. Treatment convenience is what most people with diabetes give highest priority in order to effectively manage their condition. We hope to be able to radically change insulin delivery, offering tablets in addition to injectable treatments. The development of oral formulations for both insulin and GLP-1 is still at an early stage and many technological challenges remain. Our current work involves searching for the most suitable compounds and the best method of oral delivery, one that will ensure that the active ingredients are not destroyed or degraded in the gastrointestinal tract and move through the gut to exert therapeutic effect on blood glucose. We are also developing a faster-acting bolus insulin to be taken at mealtimes. Our faster-acting insulin aspart entered phase 1 development in 2010. Building
a GLP-1 portfolio Over the past 25 years, we have built a portfolio of modern insulin products covering the full spectrum of treatment needs for insulin. We are now building a GLP-1 portfolio, developing oral and GLP-1/ insulin combination treatments and researching the combination of GLP-1 with insulin, with the intention to provide an even broader range of treatment options. Our GLP-1 pipeline includes oral GLP-1 and a fixed combination of Victoza® with Degludec, which may offer the benefits of both compounds in a fixed convenient solution. Obesity:
establish a presence |
Receiving regulatory approval for antiobesity medications remains a major challenge. Several compounds targeting obesity have recently failed to obtain regulatory approval due to limited efficacy outweighed by side effects. However, given the initial results seen in randomised controlled trials with liraglutide, we believe the compound can offer significant benefit for people challenged with weight issues. Given the initial results seen in randomised controlled trials with liraglutide, we believe the compound can offer significant benefit for people challenged with weight issues. Haemophilia:
expand portfolio We have a solid position in the treatment of haemophilia with inhibitors due to the success of NovoSeven®, which remains the leading recombinant bypassing agent available for these patients. We are also working to develop two potential successors to NovoSeven®, a long-acting recombinant factor VIIa derivative and a fast-acting recombinant factor VIIa analogue, both in clinical development. Our long-term ambition is to develop more convenient treatment and safe options for all people with rare bleeding disorders. We are therefore leveraging our core protein capabilities to develop recombinant and long-acting factor VIII and IX compounds for the treatment of haemophilia A and B respectively. The primary focus in haemophilia treatment is to prevent bleeds and subsequently reduce damage to joints. Strategies
for other biopharmaceutical business areas The overall strategy for our hormone replacement business is to focus on ultra-low-dose offerings, with a particular focus on Vagifem® 10 µg, which was launched in 2010. The development of an inflammation franchise is a long-term investment to create growth opportunities. Chronic autoimmune inflammation is a disease area where our core competences in protein molecules and chronic disease care can be leveraged. In the core disease areas of rheumatoid arthritis, psoriatic arthritis and inflammatory bowel diseases, clinical use of first-generation protein-based biologic agents that modify overactive immune response have been shown to offer significant benefit to patients. However, in each of these disease areas, there are also significant |
18 Novo Nordisk Annual Report 2010
| Our business |
numbers of patients who do not adequately respond to current treatments, so there is an opportunity for new treatments to address these unmet medical needs.
In order to successfully build a presence in this treatment area, we are investing in early-stage research with the hope of finding the underlying causes of inflammatory conditions and developing new treatments for these conditions, particularly for patients who are unresponsive to current treatments. Our research and development centres in the US, China and Denmark are successfully recruiting talent and medical teams are being established to support pipeline progression.
Device
innovation
Novo
Nordisk produces the world’s most widely used prefilled and durable insulin
pen devices. Striving to continuously improve chronic disease therapy, we
have designed these devices to improve dose accuracy, convenience and general
user-friendliness.2,3
The
same technologies are used for modern insulins and Norditropin®.
Our research and development priorities for device innovation are guided by customer insight studies. The ultimate goal is convenient and simple device technology that supports treatment compliance, with positive implications for patients’ health.4,5 Our devices also positively differentiate our products from competitor products.
| 1. | Kasuga. J Clin Invest. 2006;116:1756–1760. |
| 2. | Asakura T, Seino H, Nakano R, et al. A comparison of the handling and accuracy of syringe and vial versus prefilled insulin pen (FlexPen®). Diabetes Technol Ther. Oct 2009;11(10):657–661. |
| 3. | Korytkowski M, Bell D, Jacobsen C, Suwannasari R. A multicenter, randomized, open-label, comparative, two-period crossover trial of preference, efficacy, and safety profiles of a prefilled, disposable pen and conventional vial/syringe for insulin injection in patients with type 1 or 2 diabetes mellitus. Clin Ther. 2003 Nov;25(11):2836–48. |
| 4. | Korytkowski M, Bell D, Jacobsen C, Suwannasari R. A multicenter, randomized, open-label, comparative, two-period crossover trial of preference, efficacy, and safety profiles of a prefilled, disposable pen and conventional vial/syringe for insulin injection in patients with type 1 or 2 diabetes mellitus. Clin Ther. 2003 Nov;25(11):2836–48. |
| 5. | Graff MR, McClanahan MA. Assessment by patients with diabetes mellitus of two insulin pen delivery systems versus a vial and syringe. Clin Ther. 1998 May–Jun;20(3):486–96. |
We believe that the current functional organisational structure, governance set-up, resources and competences are sufficiently effective and robust. In support of our strategic objectives and future growth, we are:
| • | improving global governance in key areas |
| • | focusing on attracting and developing talents in key markets to drive diversity and growth |
| • | developing business and organisational roadmaps for new business areas. |
We are also improving our ability to manage innovation, the globalisation of our business and supply chain, and the pursuit of production efficiencies.
Improving
global governance
Operating
globally as a pharmaceutical company with a strong patient focus means that
the company is inevitably faced with dilemmas relating to ethical business conduct
and behaviour. One clear dilemma is related to our objective of providing therapies
to patients wherever they are. Novo Nordisk consequently engages in business
in countries where the general business environment is challenging. We have
taken a number of measures to ensure compliance with both our own and international
ethical standards, and in 2010 we strengthened governance to enhance the monitoring
of the ethical climate within our organisation.
The internal governance structure for business ethics was upgraded to a larger board structure with representation from all regions. Steps were also taken to strengthen the global legal compliance structure, clearly separating compliance responsibility from other legal tasks. We have also changed the way we track business ethics training. Previously, we required all managers to be trained in business ethics, as well as staff involved in sales and marketing and regulatory and public affairs. Beginning in 2010, Novo Nordisk required that all employees should be trained in business ethics annually. See pp 10 and 98.
Attraction,
retention and development of our people
In our knowledge-intensive
business, recruiting, mentoring and retaining talented people throughout the
world is critical to sustaining our growth. To attract the type of people we
need, we have developed a global employer branding programme, Life-changing
careers, and have strengthened our leadership development.
During 2010, about 1,000 new leaders were appointed throughout the company. Training and development of leadership competences remains a focus area, and new training programmes to develop personal leadership skills and employees identified as having senior management potential will be introduced in 2011. We are also building our leaders’ capacity to implement and demon strate the Novo Nordisk Way, our values-based management system.
Diversity
We believe
that diversity is a prerequisite for staying competitive in the global marketplace
and attracting the best talent. During
Novo Nordisk Annual Report 2010 19
| Our business |
|
2010, we made progress towards our diversity target, with diver sity by gender and nationality increasing in senior management teams. See p 10. There are, however, significant challenges. It is clear that the continued growth of Novo Nordisk requires the recruitment of highly talented employees in many large markets. We are accelerating the development of corporate hubs throughout the world to provide career and development opportunities for highly talented employees outside Denmark. We
are improving our Supporting
new products and therapy areas Because development of oral insulin and oral GLP-1 requires specific knowledge of the gastrointestinal tract, our development efforts have involved partnerships which build on our internal capabilities. We have developed tablet production facilities for these clinical trials, but large-scale production will require additional facilities and capabilities. To support our ambitions in obesity, general haemophilia and in flammation, we are continuing to expand capabilities, competences and resources in line with progress in our business plans. Our success in these areas will depend on our ability to ensure sufficient leadership and commercialisation capabilities in these new therapy areas. Innovation Projects launched include: the New Sales Model project aimed at exploring sales channel options to address changing customer needs and behaviour; the Future Workplace project to identify and address key challenges in attracting, retaining and developing talented people; and the Base of the Pyramid project to develop a business model addresses that the needs of patients in the poorest countries. |
Globalisation This organisational change was made to further develop the significant business potential in China and improve oversight of this part of our business. The business challenges in China are significant, with a competitive business environment, a highly competitive labour market and increasingly complex legislation. However, Novo Nordisk is generally well positioned in the Chinese diabetes market, with a market share by volume of approximately 60%. North America, particularly the US market, is another important growth area for our business. As our market share in the US has increased substantially in recent years, we have increased our efforts to attract talent and build organisational support structures for this market. As Novo Nordisk continues to grow and expand, we must focus resources on organisational coordination and foster innovation and collaboration across borders. Developing virtual workplaces and processes which support virtual working is also critical to our future success. |
20 Novo Nordisk Annual Report 2010
| Our business |
 |
Creating long-term value |
Interview
with Lise Kingo,
Novo Nordisk’s chief of staffs
Why
does Novo Nordisk put so much
emphasis on the Triple Bottom Line?
We want
to be a sustainable business, and this implies being profitable to secure
future growth and to make our contribution to social and economic development.
We have chosen to translate our commitment to sustainable development as the
Triple Bottom Line principle: balancing financial, social and environmental
considerations in a responsible way.
In practice, this means that we manage and account for our social and environmental performance in the same way as we do for our financial performance.
A fundamental aspect of the Triple Bottom Line principle is that we acknowledge our role as a corporate citizen and consider the societal impacts, both positive and potentially negative of our business. When we make decisions and priorities to secure business success for the future, we must always take into account the concerns and interest of all stakeholders.
What
role should companies play
in addressing global challenges?
Business
and society are not separate actors, but closely interconnected. That is why
sustainability challenges must be high on board agendas: poverty and poor health,
urbanisation and migration, demographics and pandemics, climate change and water
scarcity – all of these issues need to be factored into business strategies
and risk assessments.
Our priorities are aligned with the Millennium Development Goals. As a global leader in diabetes care we see a role for ourselves in highlighting how some of the current global challenges are connected and therefore need to be addressed at their roots. Climate change and the diabetes pandemic are examples of how unsustainable lifestyles threaten to undermine the future for generations to come. Working in partnerships we can leverage our core competencies to contribute to economic prosperity, public health and low-carbon growth.
As a company with global reach, we have a key role in con tri -buting to more balanced, sustainable growth. There is a growing recognition that capitalism as we have known it is unsustainable, but that market mechanisms, when effective, are the best way to create shared value. What we will need is therefore to shift towards what some have termed ‘sustainable capitalism’.
All economic activity is based on the use of natural and human resources. Natural resources are scarce. Human resources are abundant. None of them are equitably distributed, nor is their real value reflected in the current market economy. This needs to change. We engage in several ways, including through partnerships and alliances with other leading companies under
the auspices of the Global Compact LEAD initiative, to demonstrate how you can balance profits and non-financial benefits for society in responsible and sustainable ways.
How
can you determine whether
this approach creates business value?
Our purpose
extends beyond short-term profits. We provide long-term value by serving the
needs of people whose lives and quality of life depend on the treatments and
services that we can provide. When we do business in a responsible way, we create
value in several ways: we strengthen our company reputation, earn stakeholder
trust, build employee engagement and customer satisfaction and through these
assets a stronger foundation for remaining a profitable business, which ultimately
benefits our shareholders.
We are seeing increasing evidence of a clear correlation of actions as a responsible and sustainability-driven business and our performance, measured by conventional yardsticks such as operational profits and return on invested capital.
In
what ways can you assess the benefits to society?
Together
with experts and with inputs from stakeholders we have developed a methodology
that enables us to value the contribution of our Triple Bottom Line approach
in a profit and loss perspective. We have called this initiative our Blueprint
for Change programme, and we have conducted Triple Bottom Line reviews looking
at our climate action strategy and our business approach in China.
The China case takes its point of departure in the fact that diabetes now affects more than 40 million people and their families, and the number is projected to double over the next 15 years, posing a growing social, educational and economic challenge. Our long-term business strategy, which includes significant investments in strengthening the healthcare system in partnership with the Ministry of Health and establishing a strong local presence, is having a real and lasting impact. Looking at the value created from 2005 to 2010 the study demonstrates how we are changing diabetes in China and at the same time building a profitable business.
Providing training for physicians and offering education and support for people with diabetes has saved 140,000 life years, and this number is projected to increase by 30% annually because the benefits of effective diabetes care will be seen over a longer time span. Our business activities have created jobs in research and development, production and sales as well as indirectly through our supplier base and employees’ local spending, totalling 14,600 jobs. And energy efficient local production reduces emissions related to production by 20%, transportation emissions have fallen by a factor of six, and unit costs have been reduced by 40%.
Novo Nordisk Annual Report 2010 21
| Our business |
| Our business |
|
The Novo Nordisk Way is the foundation of the values-based management system in Novo Nordisk. It describes who we are, where we want to go, and how we work. Its origins can be traced back to when the company was founded in the 1920s, and while the wording has been updated over time, the essence remains the same. The continued relevance of the Novo Nordisk Way was reaffirmed during 2010. On the occasion of the company’s 10-year anniversary as a focused healthcare company and coinciding with his own 10-year tenure as CEO, Lars Rebien Sørensen took the opportunity to revisit the document. With an open mind and no predetermined outcome, he set out on a journey to engage with employees and stakeholders to seek their inputs on what to retain and what to renew. The journey took him to seven destinations and face-to-face meetings with more than 350 employees and 100 patients, healthcare providers and other stakeholders. The response was consistent across geographical borders, organisational boundaries and external partners: the messages and the values embedded in the Novo Nordisk Way were not to be |
changed. On the contrary, there was a strong wish to reinforce the existing business principles and values. As a result, focus on patient needs and the Triple Bottom Line has been increased. The values-based management unifies a strong corporate culture and guides behaviour in all parts of the organisation. While our values have not changed, the components of the Novo Nordisk Way have been shortened and simplified, presenting the company’s ambitions and values in a format that is easier to understand and more accessible for all employees. As the company continues to grow and onboards several thousand new employees each year, emphasis has been put on framing a list of 10 Essentials which describe how the values are put into action. As before, a follow-up methodology, called facilitations, helps us assess and manage the degree to which the Novo Nordisk Way is actively put into practice throughout our company. In 2011, the new Novo Nordisk Way will be rolled out in the organisation, strengthening a unified culture around our revised ambitions and setting a clear direction for the next decade. |
| The Novo Nordisk Way | |
|
In 1923, our Danish founders began a journey to change diabetes. Today, we number thousands of employees across the world with the passion, the skills and the commitment to continue this journey to prevent, treat and ultimately cure diabetes. |
|
| • | Our ambition is to strengthen our leadership in diabetes. |
| • | We aspire to change possibilities in haemophilia and other serious chronic conditions where we can make a difference. |
| • | Our key contribution is to discover and develop innovative biological medicines and make them accessible to patients throughout the world. |
| • | Growing our business and delivering competitive financial results is what allows us to help patients live better lives, offer an attractive return to our shareholders and contribute to our communities. |
| • | 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. |
| • | We never compromise on quality and business ethics. |
| Every day we must make difficult choices, always keeping in mind what is best for patients, our employees and our shareholders in the long run. | |
| It’s the Novo Nordisk Way. | |
| The Essentials | |
| The Essentials are 10 statements describing what the Novo Nordisk Way looks like in practice. | |
|
The Essentials are meant as a help for managers and employees in evaluating the extent to which their organisational units are acting in accordance with the Novo Nordisk Way, ie the degree to which we are ‘walking the talk’. The Essentials are helpful in identifying actions which business units can take to further align processes and procedures with the thinking and values that characterise the Novo Nordisk Way. |
|
| • | We create value by having a patient-centred business approach. |
| • | We set ambitious goals and strive for excellence. |
| • | We are accountable for our financial, environmental and social performance. |
| • | We provide innovation to the benefit of our stakeholders. |
| • | We build and maintain good relations with our key stakeholders. |
| • | We treat everyone with respect. |
| • | We focus on personal performance and development. |
| • | We have a healthy and engaging working environment. |
| • | We optimise the way we work and strive for simplicity. |
| • | We never compromise on quality and business ethics. |
Novo Nordisk Annual Report 2010 23
| Our business |
|
In 2010, significant progress was made throughout Novo Nordisk’s clinical development pipeline. This overview illustrates key development activities, including entries into the pipeline and progression of development compounds. See more at novonordisk.com/investors/rd_pipeline/rd_pipeline.asp and clinicaltrials.gov. |
Phase
1 Phase
2 |
| Therapy area |
Indication
|
Compound
|
Description
|
|||
| Diabetes care | ||||||
| Type 1 and 2 diabetes | Degludec | Ultra-long-acting basal insulin. Enrolment in the phase 3a programme completed in June 2010. First phase 3a study results announced in October 2010. | ||||
|
|
|
|
|
|
|
|
| Type 1 and 2 diabetes | DegludecPlus | Ultra-long-acting basal insulin with a bolus boost. Enrolment in the phase 3a programme completed in June 2010. First phase 3a study results announced in August 2010. | ||||
|
|
|
|
|
|
|
|
| Type 2 diabetes | Semaglutide | Once-weekly GLP-1 analogue. Phase 3 initiation was postponed in June 2010 pending a long-acting portfolio development strategy decision. | ||||
|
|
|
|
|
|
|
|
| Diabetes | Type 2 diabetes | NN9068 | GLP-1 and basal insulin combination. Phase 1 studies are ongoing. | |||
|
|
|
|
|
|
|
|
| Type 1 and 2 diabetes | NN1218 | Ultra-fast-acting
insulin analogue. First phase 1 studies initiated during the second quarter of 2010. |
||||
|
|
|
|
|
|
|
|
| Type 1 and 2 diabetes | NN1952 | Fast-acting
oral insulin analogue. First phase 1 study completed during the fourth quarter of 2010. |
||||
|
|
|
|
|
|
|
|
| Type 2 diabetes | NN9924 | Long-acting oral GLP-1 analogue. First phase 1 study initiated in the first quarter of 2010. | ||||
|
|
|
|
|
|
|
|
| Obesity | Obesity | Liraglutide | Once-daily GLP-1 analogue. First phase 3a study completed during the third quarter of 2010. The remaining phase 3a studies are expected to be initiated mid-2011. | |||
| Biopharmaceuticals | ||||||
| Congenital FXIII deficiency | NN1841 | Recombinant coagulation factor XIII. Phase 3a study completed during the second quarter of 2010. Regulatory submission in the US and EU is expected in the first half of 2011. | ||||
|
|
|
|
|
|
|
|
| Haemophilia A | NN7008 | Recombinant coagulation factor VIII. Phase 3 studies ongoing throughout 2010. | ||||
|
|
|
|
|
|
|
|
| Haemophilia with inhibitors | NN1731 | Fast-acting recombinant coagulation factor VIIa analogue. Phase 2 studies completed during the second quarter of 2010. Phase 3 is expected to be initiated mid-2011. | ||||
|
|
|
|
|
|
|
|
| Haemophilia with inhibitors | NN7128 | Long-acting recombinant coagulation factor VIIa derivative. Phase 2 trial ongoing throughout 2010. | ||||
|
|
|
|
|
|
|
|
| Haemophilia/ haemostasis |
Cardiac surgery | NN1810 | Recombinant coagulation factor XIII. Phase 2 trial ongoing throughout 2010. | |||
|
|
|
|
|
|
|
|
| Haemophilia B | NN7999 | Long-acting recombinant coagulation factor IX derivative. Phase 1 trial is ongoing. | ||||
|
|
|
|
|
|
|
|
| Haemophilia with inhibitors | NN7129 | Subcutaneous
long-acting recombinant coagulation factor VIIa derivative. Phase 1 study completed during the second quarter of 2010. |
||||
|
|
|
|
|
|
|
|
| Haemophilia A | NN7088 | Long-acting
recombinant coagulation factor VIII derivative. Phase 1 study initiated during the third quarter of 2010. |
||||
|
|
|
|
|
|
|
|
|
Haemophilia
|
NN7415 |
Anti-tissue
factor pathway inhibitor. Phase 1 initiated during the fourth quarter
of 2010.
|
||||
|
|
|
|
|
|
|
|
| Rheumatoid arthritis | Anti-NKG2d | Humanised
recombinant monoclonal antibody. Phase 2a study initiated during the third quarter of 2010. |
||||
|
|
|
|
|
|
|
|
| Rheumatoid arthritis | Anti-IL-20 | Humanised recombinant monoclonal antibody. Phase 1 completed in the fourth quarter 2010. Phase 2a study is expected to be initiated during the first half of 2011. | ||||
| Inflammation |
|
|
|
|
|
|
| Rheumatoid arthritis | Anti-C5aR | Humanised
recombinant monoclonal antibody. First phase 1 study completed during the second quarter of 2010. |
||||
|
|
|
|
|
|
|
|
| Rheumatoid arthritis | Anti-IL-21 | Humanised
recombinant monoclonal antibody. Phase 1 study initiated during the third quarter of 2010. |
||||
|
|
|
|
|
|
|
|
24 Novo Nordisk Annual Report 2010
| Our business |
|
Phase
2a Phase
2b Phase
3 |
Phase
3a Phase
3b Filed/regulatory
approval |
|
|
|
|
|
|
|
|
|
|
|
| Intended clinical benefit | Phase 1 | Phase 2 | Phase 3 |
Filed/regulatory
approval
|
|||||
| Long-acting basal insulin with duration of action of 24 hours and an improved safety profile. |  |
||||||||
|
|
|||||||||
| A soluble fixed combination of fast-acting and long-acting insulin combining 24-hour basal insulin coverage with a distinct meal peak. | |
||||||||
|
|
|||||||||
| Provide the pharmacological actions of a GLP-1 analogue with fewer injections. |  |
||||||||
|
|
|||||||||
| Combination of a basal insulin and a GLP-1 analogue intended to combine the benefits of the two hormones in a single preparation. |  |
||||||||
|
|
|||||||||
| Fast-acting insulin for improvement of glycaemic control during a meal. | |
||||||||
|
|
|||||||||
| Insulin delivered as a tablet. | |
||||||||
|
|
|||||||||
| A GLP-1 analogue delivered as a tablet. | |
||||||||
|
|
|||||||||
| Sustainable weight loss for people with obesity, including those at risk of developing diabetes. | |
||||||||
| Prophylactic treatment of people with FXIII congenital deficiency. |  |
||||||||
|
|
|||||||||
| Prevention and treatment of bleeds in people with haemophilia A. | |
||||||||
|
|
|||||||||
| Effective and sustained resolution of bleeds in people with haemophilia and inhibitors, reducing the need for treatment and the time to pain relief. |  |
||||||||
|
|
|||||||||
| Prophylactic treatment of people with haemophilia and inhibitors. | |
||||||||
|
|
|||||||||
| Intended to avoid allogenic blood transfusions in low- to medium-risk patients undergoing cardiac surgery using cardiopulmonary bypass. | |
||||||||
|
|
|||||||||
| Routine prophylaxis and treatment of bleeds for people with haemophilia B. |  |
||||||||
|
|
|||||||||
| Subcutaneous administration of long-acting treatment for haemophilia patients with inhibitors to other factor replacements. | |
||||||||
|
|
|||||||||
| Routine prophylaxis and treatment of bleeds for people with haemophilia A. | |
||||||||
|
|
|||||||||
| Novel mechanism of action intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
||||||||
|
|
|||||||||
| Novel mechanism of action intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
||||||||
|
|
|||||||||
| Novel mechanism of action intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
||||||||
|
|
|||||||||
| Novel mechanism of action intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
||||||||
|
|
|||||||||
| Novel mechanism of action intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
||||||||
|
|
|||||||||
Novo Nordisk Annual Report 2010 25
| Our business |
Novo Nordisk is a world leader in diabetes care and has a leading position in haemophilia treatment. We also provide growth hormone therapy and hormone replacement therapy and have development projects targeting inflammation, obesity and the full spectrum of rare bleeding disorders. Our more than 30,000 employees work in 74 countries.
|
•
|
Headquarters
and corporate hubs
|
•
|
Production
sites
|
|
|
• • • |
Bangalore,
India
Beijing, China Copenhagen, Denmark Princeton, New Jersey, US Tokyo, Japan Zürich, Switzerland Regional and business area offices Research
and
development facilities Bagsværd,
Denmark
Beijing,
China
Gentofte,
Denmark
Hillerød,
Denmark
Måløv,
Denmark
Princeton,
New Jersey, US
Seattle,
Washington, US
Regional
clinical, medical
and regulatory affairs centres Beijing,
China
Princeton,
New Jersey, US
Tokyo,
Japan
Zürich,
Switzerland
|
• • |
Ain-Allah,
Dely Brahim, Algeria |
|
North
America
|
Europe
|
||
|
Employees:
|
Employees:
|
||
|
4,457
|
17,752
|
||
|
Sales:
|
Sales:
|
||
|
39%
of total sales
|
31%
of total sales
|
||
|
Insulin
volume share:
|
Insulin
volume share:
|
||
|
42%
of the total market
|
53%
of the total market
|
||
|
Modern
insulin volume share:
|
Modern
insulin volume share:
|
||
|
37%
of the segment
|
51%
of the segment
|
26 Novo Nordisk Annual Report 2010
| Our business |
|
International
Operations
|
Hereof
Region China*
|
Japan
& Korea
|
|
Employees:
|
Employees:
|
Employees:
|
|
7,279
|
3,511
|
995
|
|
Sales:
|
Sales:
|
Sales:
|
|
21%
of total sales
|
7%
of total sales
|
9%
of total sales
|
|
Insulin
volume share:
|
Insulin
volume share:
|
Insulin
volume share:
|
|
57%
of the total market
|
63%
of the total Chinese market
|
63%
of the total market
|
|
Modern
insulin volume share:
|
Modern
insulin volume share:
|
Modern
insulin volume share:
|
|
54%
of the segment
|
70%
of the segment in China
|
56%
of the segment
|
* China was part of International Operations in 2010 but became a separate region on 1 January 2011.
Novo Nordisk Annual Report 2010 27
| Diabetes care |
| Diabetes care |
Novo Nordisk has pioneered many therapeutic breakthroughs in diabetes care and today diabetes remains our primary focus. The company is the diabetes care market leader with 51% of the total insulin market and 46% of the modern insulin (insulin analogue) market, based on volume, at year-end.
Diabetes is a metabolic disorder affecting the way our bodies use digested food for growth and energy. Diabetes causes as many deaths as HIV/AIDS, disables millions and negatively affects the global economy. The International Diabetes Federation estimates that the number of people with diabetes will increase from 285 million today to 438 million in 2030.
Even in countries with strong healthcare systems, the challenge of keeping diabetes under control is significant. A survey conducted in eight countries with 3,000 respondents during 2010 found that a third of those surveyed miss injections of prescribed insulin doses and that nine out of 10 wish that insulin could be dosed less than once a day to effectively manage their diabetes.1
We are dedicated to Changing Diabetes® and improving quality of life for people with diabetes. We do this by developing innovative treatments intended to serve individual needs and covering all stages of diabetes. In addition, we work with governments, health-care providers, patient organisations and people with diabetes to improve standards of care throughout the world.
By engineering proteins we have created a portfolio of modern insulins that offer options for individual treatment needs to achieve and maintain improved blood glucose control safely.
Treatment guidelines for diabetes call for different approaches at different stages.2 For type 2 diabetes, insulin may be introduced following lifestyle changes and initiation of tablet or GLP-1 therapy. As a third step, treatment guidelines recommend transition to intensive insulin therapy to maintain glucose targets.
Maintaining tight glucose control is associated with fewer serious complications and better treatment outcomes. For insulin initiation, treatment guidelines call for including either a long-acting basal insulin or, in parts of the world, a modern premix insulin with dual release to cover both mealtime and basal requirements. Insulin treatment can be intensified in two ways, either with a modern premix insulin or by adding a rapid-acting modern insulin to the long-acting basal insulin at mealtimes.
Our modern insulin portfolio is unique in providing a full range of individualised treatment options for people with diabetes, accommodating different treatment norms and capabilities worldwide. Treatment may also vary because people are different. In some Asian groups, for instance, pancreatic beta cells have been found to be more fragile, and the need for insulin in people with these characteristics may therefore be different.
Novo Nordisk’s modern insulin portfolio includes:
| • | Levemir®, a soluble, long-acting modern insulin for once-daily use for type 2 diabetes. When it is time to begin insulin, Levemir® provides glucose control with a positive weight profile. Weight maintenance is important because insulin has long been associated with weight gain, a barrier to beginning insulin treatment according to diabetes experts. |
| • | NovoRapid® (NovoLog® in the US), the world’s most widely used rapid-acting insulin for use at mealtimes. For people with type 2 diabetes who have uncontrolled blood glucose levels while on a basal insulin, intensification with NovoRapid®/ NovoLog® to a basal-bolus regimen helps attain and maintain treatment goals. |
| • | NovoMix® 70/50/30 (NovoLog® Mix 70/30 in the US) is a dual-release modern insulin that covers both mealtime and basal requirements. |
During 2010, Novo Nordisk’s long-acting insulin Levemir® joined NovoRapid® and NovoMix® in achieving blockbuster status, with sales exceeding 1 billion US dollars for the preceding 12-month period. NovoRapid® achieved sales of 2 billion dollars in a one-year period, becoming a double blockbuster.
NovoRapid® is the world’s most prescribed rapid-acting insulin, used by people with both type 1 and type 2 diabetes. It is also approved for women who are pregnant or breastfeeding.
All Novo Nordisk’s modern insulins on the market have been investigated in many randomised, controlled trials and in observational studies, and they are also monitored for any safety signals through rigorous post-marketing safety surveillance.
|
Key
events in diabetes 2010
|
||
| • | Novo
Nordisk acknowledged as having the ‘Best Diabetes Care Pipeline’.3 |
|
| • | Levemir®
achieves blockbuster status. |
|
| • | NovoRapid®/NovoLog®
achieves
double blockbuster status. |
|
| • | Victoza®
gains GLP-1 leadership and
expands GLP-1 market in key markets. |
|
| • | Phase
3 results for first of three obesity trials for liraglutide. |
|
| • | Phase
3 results for Degludec and DegludecPlus. |
|
| • | First
human dose results for oral insulin and oral GLP-1. |
|
| • | Changing
Diabetes®
Leadership Forums facilitate
change in sub-Saharan Africa, and the Middle East and North Africa. |
|
| • | NovoDose™, the first ever mobile dosing application, launched for iPhone and iPad in the US. | |
Novo Nordisk Annual Report 2010 29
| Diabetes care |
|
Continuous
innovation for In January 2011, we completed the phase 3a programme for Degludec and DegludecPlus. The data generated from 17 randomised, controlled treat-to-target trials in more than 10,000 type 1 and type 2 diabetes patients from more than 40 countries, consistently revealed benefits related to efficacy, safety and convenience of both Degludec and DegludecPlus. The trials mostly used insulin analogues as comparator products and the key results are provided in this section. We expect to submit applications for regulatory approval of Degludec and DegludecPlus in the US and Europe in the second half of 2011. In a 52-week trial comparing Degludec versus insulin glargine in type 2 diabetes, 1,030 insulin naive people with type 2 diabetes were randomised 3 to 1 to either Degludec or insulin glargine once daily in addition to metformin with or without a DPP-IV inhibitor. Degludec effectively improved long-term glycaemic control, substantially decreasing blood glucose from a baseline of 8.2% to around 7% in both patient groups. For Degludec, the fasting plasma glucose level was statistically significantly lower than observed in the comparator group. Degludec also showed a significantly lower risk of hypoglycaemia compared to insulin glargine. Specifically, the rate of confirmed night-time hypoglycaemic events was statistically significantly lower in the group treated with Degludec, with a reduction of more than 35% compared to the insulin glargine group. Degludec demonstrated a good safety and tolerability profile and there were no apparent differences between the treatment groups with respect to adverse events and standard safety parameters. In two 52-week studies comparing Degludec to insulin glargine in basal-bolus treatment of type 1 and type 2 diabetes, significant advantages were demonstrated with Degludec. In the study in type 2 diabetes, both treatment arms effectively lowered blood
|
|
glucose levels to approximately 7.1%. Degludec showed a lower risk of overall hypoglycaemia compared to insulin glargine and an even greater reduction in night-time hypoglycaemia. In the study with type 1 diabetes, Degludec and insulin glargine produced a similar reduction in blood glucose levels. Again, a significant reduction in night-time hypoglycemia was observed with Degludec. In a 26-week basal-bolus trial comparing Degludec with insulin glargine in type 1 diabetes, a regimen with dosing intervals alternating between eight and 40 hours for the administration of Degludec was compared to either Degludec at the evening meal, or insulin glargine. All patients used NovoRapid® as bolus insulin with meals. The flexible dosing arm of Degludec demonstrated statistically significant reduction in night-time hypoglycaemia of around 40% when compared to the insulin glargine group. The clinical programme also included two studies in type 2 diabetes exploring three-times-weekly administration of Degludec compared to a daily dose of insulin glargine. Three-times-weekly administration of Degludec effectively lowered blood glucose in both studies, however, it did not meet pre-specified regulatory requirements. These studies did confirm the ultra-long action profile of Degludec. DegludecPlus, the first prandial basal insulin combination containing ultra-long-acting Degludec and insulin aspart (NovoRapid®), was also tested in phase 3a studies. In one six month study, twice-daily DegludecPlus was compared to twice-daily NovoMix® 30 in people with late-stage type 2 diabetes. DegludecPlus effectively improved long-term glycaemic control by reducing blood glucose to just above 7%. Despite similar blood glucose reductions to NovoMix® 30, the DegludecPlus treated group demonstrated a significantly lower risk of hypoglycaemia including a more than 70% reduction in night-time hypoglycaemia. The DegludecPlus patients also had a significant reduction in fasting blood glucose, achieved target control faster and required a lower total insulin dose. Innovative
devices and tools for physicians This new technology is part of a trend of physicians using hand-held devices when administering treatment. NovoDose™ will be introduced in other markets in 2011. FlexPen®, the world’s most widely used prefilled insulin pen, is available for Levemir®, NovoRapid®/NovoLog® and NovoMix®/ NovoLog® Mix. It eliminates the need to manually load insulin into a delivery device or use a separate vial and syringe. Once in use, the prefilled pen may be stored at room temperature for 14 days or more, which can suit flexible lifestyles. FlexPen® is made of a recyclable plastic, which has the potential to reduce environmental impact. Our newest durable device, NovoPen Echo®, has been designed with children in mind. It comes in two colours and features dosing with half-unit increments, suitable for children requiring small insulin doses. It features a simple memory function that allows the user to see the size of the last dose and the time since injection. |
30 Novo Nordisk Annual Report 2010
| Diabetes care |
NovoPen Echo® was preferred by 80% of the participants in a usability study that included children with diabetes, their parents and healthcare professionals when compared to other insulin pens for children. NovoPen Echo® was launched in Canada, Denmark, Finland, Israel and Sweden in 2010 and will be launched in additional markets in 2011.
We continue to focus on making the most preferred treatment devices even better. Next-generation devices in our pipeline aim to further enhance the competitiveness of our products.
Victoza®:
innovative early treatment
Victoza®,
or liraglutide, is the first and only human Glucagon-Like Peptide (GLP-1)
analogue with 97% similarity to the natural gut hormone. Like natural GLP-1,
once-daily Victoza®
works by stimulating the beta cells in the pancreas to release insulin only
when blood sugar levels are high.
Until recently, most available treatments for diabetes involved tradeoffs for people with diabetes and physicians. While effective at lowering blood glucose, they carried the risk of inducing low blood sugar episodes (hypoglycaemia) and weight gain.
New GLP-1 therapies are a major innovation in the treatment of type 2 diabetes because they lower glucose while having a low risk of triggering hypoglycaemia, and in most people with diabetes they also support weight loss. In type 2 diabetes, the ability of the pancreas to release insulin in response to glucose is impaired. GLP-1 therapies help address this defect by directly acting on the pancreas.
Victoza®, the only once-daily GLP-1, can be used by adults with type 2 diabetes who are unable to achieve blood glucose goals with lifestyle changes and metformin. Treatment guidelines now call for the use of GLP-1 as an option for early treatment of diabetes. GLP-1 is a hormone from the human gut involved in glucose regulation. First available in Europe in 2009, Victoza® was launched in the US and Japan during 2010 and is now available in 24 markets. Victoza® is steadily capturing and expanding the market for GLP-1 treatment.6
Changing
Diabetes®
For millions
of people living with diabetes today innovative treatments are a privilege
they cannot enjoy because healthcare and treatment options are either insufficient
or not available. With the epidemic growth in diabetes, happening particularly
fast in low-income and emerging economies and hitting vulnerable groups all
over the world the hardest, this presents a huge social challenge.
As a world leader in diabetes care, we have a responsibility to reach out beyond those people who already benefit from our products and the support we offer to them, and to do everything we can to ultimately defeat diabetes. This implies extending the scope of our efforts to people who do not have access to proper diabetes care as well as to people at risk of getting diabetes. Changing Diabetes® is our promise to improve health and quality of life and to actively contribute to a society that provides equal and non-discriminatory support for people with chronic conditions.
Our Changing Diabetes® ambitions are to:
| • | provide better treatment and care for all people with diabetes |
| • | raise public awareness of the need to take action on diabetes |
| • | secure more resources to prevent and detect diabetes. |
Better
treatment and care for all
We believe
that by finding better methods of prevention, detection and treatment we will
be able to defeat diabetes. To do so, we must begin by gaining a better understanding
of people with diabetes and their needs.
The second Diabetes Attitudes, Wishes and Needs (DAWN™) study represents one of the most significant new initiatives from Novo Nordisk to learn from people with diabetes. A follow-up to our landmark study in 2001, this study will be conducted over the next few years to assess the needs of people with diabetes globally with an aim to improve health literacy and support effective selfmanage-ment. The largest study of its kind, the new DAWN™ study will establish a new global understanding and awareness of the needs of people with diabetes and those who care for them. The initiative will build on the lessons learned and the international networks developed in our initial, ongoing DAWN™ programme.
Every person has a fundamental right to health. This is stated in the Universal Declaration of Human Rights and is the underlying premise of our efforts to improve availability, accessibility, affordability and quality of care. We also seek to contribute to the UN Millennium Development Goals, which set specific targets to overcome by 2015 some of the major challenges facing the world, including reducing child mortality, improving maternal health and combating diseases threatening social and economic development.
In addition to providing medicines to serve individual needs, we work to improve accessibility and affordability for patients. We do this through sustainable partnerships with governments and NGOs to strengthen healthcare system capacity and to reverse the diabetes pandemic, which is imposing a double burden on fragile economies in low-income and emerging economies.
Addressing
affordability barriers
The cost
of therapy still constitutes a significant barrier for better healthcare in
low-income countries. Through our long-standing differential pricing policy
we offer insulin to all the least developed countries (LDCs), as defined by
the United Nations, at a price at or below 20% of the average prices for insulin
in the western world. Novo Nordisk has operations in 34 of the LDCs, and in
2010 either governments or non-profit organisations in 33 of these countries
chose to purchase through this offer. See p 96. Since 2006 the total volume
of insulin sold in the LDCs has increased steadily, and in 2010 the volume
increased by 30% compared to 2009.
One challenge is that governments’ procurement is subject to budget fluctuations. However, offering treatment at reduced prices does not always ensure that end users benefit as intended. To improve the impact of our differential pricing policy, we have conducted pilot projects in eight LDCs. In 2010 we recruited sales re-
Novo Nordisk Annual Report 2010 31
| Diabetes care |
|
presentatives dedicated to addressing barriers throughout the supply chain. We also carried out independent quality audits in Ghana, Nigeria, Tanzania and Uganda to improve stock manage ment and distribution and facilitate access to insulin in rural areas. Providing
treatment for children in poor countries
With an ambition to reach 10,000 children with diabetes within five years, we made a 25-million US dollar commitment in 2008. In 2010, we enrolled about 800 children and established 13 new clinics under the Changing Diabetes® in Children programme, which now provides treatment for more than 1,300 children. To help improve diagnosis and treatment of diabetes in children, we have developed a basic training manual for healthcare professionals. This work has been informed by consultations with key stakeholders from African countries and in collaboration with the International Society for Pediatric and Adolescent Diabetes (ISPAD). The manual is available free of charge at changingdiabetesaccess.com. Improving
healthcare system capacity In 2010, we commissioned an external evaluation of the World Partner Project (WPP) activities in Bangladesh and Tanzania during 2001–2009. The report shows how the WPP has resulted in active and productive partnerships with other major organisations involved in diabetes care. For example, in Bangladesh the development and deployment of a distance learning programme for doctors has resulted in a significant expansion of capacity, with 3,600 healthcare professionals trained in diabetology. Today the programme continues as a self-sustainable cooperation with a local faculty and the development of an accredited physician programme with the ambition of extending care to other rural areas in the country. Our support for healthcare capacity building includes our long-term financial commitment to the World Diabetes Foundation, including a donation of 69 million Danish kroner in 2010 (see p 87). This independent and non-profit foundation, set up by Novo Nordisk in 2001, supports the prevention and treatment of diabetes in the developing world. To date it has funded 253 projects in 96 countries. For more information about the foundation, including its annual report, see worlddiabetesfoundation.org. |
To change the course of the diabetes pandemic and improve quality of life for those with diabetes, we are working to put diabetes on public health agendas by building partnerships around a shared vision of Changing Diabetes® and implementing the UN Resolution on diabetes. Through 39 Diabetes Leadership Forums and regional or national round-tables in 77 countries since 2005, we have engaged more than 7,500 key stakeholders to date, helping to reach consensus about what it will take to address the current challenges and change diabetes. In 2010, we turned our focus to two regions where the diabetes pandemic is increasing rapidly: sub-Saharan Africa and the Middle East and Northern Africa (MENA). A Diabetes Leadership Forum Africa 2010 focused on the social and economic challenges related to the growing burden of diabetes in sub-Saharan Africa. Once a rare disease, diabetes impacts more than 12 million people in the region today and its prevalence is expected to double during the next 20 years. The meeting in Johannesburg, attended by more than 260 government representatives, international organisations, patient associations, non-governmental organisations, private sector, academic institutions and healthcare professionals from 32 countries across sub-Saharan Africa, was hosted by the Department of Health of the Republic of South Africa and the World Diabetes Foundation, and supported by the International Diabetes Federation. Health ministers and senior ministerial representatives adopted a joint statement calling for concrete actions to strengthen health systems and address non-communicable diseases, including diabetes, in sub-Saharan African countries. We sponsored and co-organised the Forum. In the MENA region diabetes is today estimated to affect more than 26 million people, and this number is set to double by 2030. At the MENA Diabetes Leadership Forum in Dubai, more than 400 decision-makers gathered to find solutions to the growing burden of diabetes. Delegates represented international and regional organisations, media, experts and members of the diabetes community from 22 countries in the region. The Forum resulted in the adoption of the Dubai Declaration on Diabetes and Chronic Non-Communicable Diseases in the Middle East and Northern Africa Region. The Forum was hosted by the UAE Ministry of Health, the executive board of the Health Ministers’ Council for Gulf Cooperation Council States, the World Diabetes Foundation and the World Bank, and was organised and sponsored by Novo Nordisk. In conjunction with the Forum, the Changing Diabetes® World Tour arrived in the United Arab Emirates. Since 2006, it has travelled across five continents to raise awareness of diabetes. A new mobile unit was added in 2010, developed in partnership with the Steno Diabetes Center, offering high-quality screening and information about diabetes to the general public. The objective is to combine awareness, screening and research in order to drive policy change towards early detection of diabetes. Screening data will contribute to a better understanding of diabetes and inform recommendations for promoting early detection and intervention. On World Diabetes Day, 14 November, more than 2.6 million people in 57 countries were engaged in different Novo Nordisk-sponsored activities, including screening and educational programmes to increase awareness. |
32 Novo Nordisk Annual Report 2010
| Diabetes care |
| Diabetes care |
34 Novo Nordisk Annual Report 2010
| Diabetes care |
sustainable change, which ultimately will increase access to diabetes screening, treatment and lifestyle education.
We have encouraging results from on-the-ground experience. Since 2007, the Indian state of Tamil Nadu has screened all pregnant women for gestational diabetes and provided free doses of NovoRapid®, approved for use during pregnancy. Positive results have led to the inclusion of screening guidelines in state policy and the establishment of national treatment guidelines. In 2011, a long-term study will be launched, with support from Novo Nordisk, to track the women diagnosed and treated and the children born to them, with the aim of improving understanding of the long-term consequences of gestational diabetes.
Building on this experience, we are now launching partnerships to address diabetes in pregnancy in Nicaragua and Colombia.
UN
high-level meeting on non-communicable diseases
In recognition
of the increasing global impact and challenge of non-communicable diseases,
the United Nations General Assembly will hold a high-level meeting on the
prevention and control of non-communicable diseases in September 2011.
We welcome this initiative, which reflects a recognition of the significant negative impact of unaddressed chronic conditions, and are committed to supporting the UN process to focus on driving change in healthcare systems. We do this through partnerships, our own programmes and engagement at global, regional and national levels.
In 2010, we pledged to provide the World Diabetes Foundation with an additional 25 million Danish kroner to be used for activities relating to the high-level meeting in 2011 and 2012. There have been 27 such meetings in the history of the UN, and HIV/AIDS is the only disease to have been a summit topic. The summit has the potential to mobilise action for a new type of collaboration that pursues a life-cycle approach to healthcare.
| 1. | Global Attitudes of Patients and Physicians in Insulin Therapy (GAPP) Survey, Novo Nordisk, 2010. |
| 2. | In October 2008, a new set of treatment guidelines for type 2 diabetes was issued by a panel of experts from the American Diabetes Association and the European Association for the Study of Diabetes. |
| 3. | The January 2010 issue of R&D Directions magazine included Novo Nordisk in its ‘Top 10 Pipelines’ list. Novo Nordisk was recognised for the ‘Best Diabetes Care Pipeline’ for the second year in a row. |
| 4. | Heise T et al. Insulin degludec: Less pharmacodynamic variability than insulin glargine under steady state conditions. Poster presentation, Poster 971, presented at European Association for the Study of Diabetes, Scientific Sessions 2010, Stockholm, Sweden, 2010. |
| 5. | Mathieu C et al. Insulin degludec, a New Generation Ultra-long acting Insulin, used Once Daily or Three Times Weekly in People with Type 2 Diabetes: Comparison to Insulin Glargine. Oral presentation no. 4, presented at European Association for the Study of Diabetes (EASD), Scientific Sessions 2010, Stockholm, Sweden, September 2010. |
| 6. | IMS, weekly NPA data. |
 |
Improvements
in diabetes care |
Interview
with Kåre Schultz,
Novo Nordisk’s chief operating officer
How
does Novo Nordisk’s diabetes care business benefit people with diabetes?
For decades,
our company has developed insulins for people with diabetes to help them live
better lives and have better control of their diabetes. Ninety years ago,
diabetes was inevitably fatal. Today, diabetes can be managed and, by developing
improvements to diabetes care, we can help people with diabetes live longer,
healthier lives.
Because modern insulins are made with protein molecules engineered to work longer or faster than naturally occurring human insulin, they can make it easier for people with diabetes to treat their diabetes and help in managing blood glucose levels. NovoRapid®, the world’s most prescribed fast-acting insulin, allows people to administer treatment with meals, reducing the need for complicated calculations and advance planning. Our delivery devices, including NovoFine® and NovoTwist® needles, can also contribute to improved treatment by reducing pain or inconvenience.
How
is Novo Nordisk supporting patients affected by the diabetes pandemic?
As the
diabetes pandemic is increasingly affecting people in developing countries,
the global reach of our diabetes care business also allows us to help more
people. We estimate that our diabetes care products are used by approximately
18 million people. This means that we are not only the global market leader
in insulin, selling 51% based on volume, but we believe that we are also reaching
roughly half of the people with diabetes who are receiving treatment and have
been introduced to insulin therapy.
It is obvious that there are more people who are either not diagnosed, not treated, or undertreated. While the International Diabetes Federation estimates that there are nearly 300 million people with diabetes globally, it also estimates that only a quarter of that number have been diagnosed and are receiving treatment. We therefore advocate for better care, train doctors and support improvements in healthcare systems. We do this both because it helps grow our business and because the need for more and better diabetes treatment is real and urgent.
What
makes Novo Nordisk the global leader in diabetes care?
We offer
a very broad product portfolio, with therapies designed for all types and
stages of diabetes, and we combine this with the broadest geographical reach.
Because our company was founded to address the medical needs of people with
diabetes our manufacturing, distribution and sales and marketing support for
diabetes care are global. This includes production facilities in countries
where diabetes is increasing rapidly such as Brazil and China.
Novo Nordisk Annual Report 2010 35
| Biopharmaceuticals |
36 Novo Nordisk Annual Report 2010
| Biopharmaceuticals |
Our specialised expertise with proteins and our understanding of chronic disease are leveraged in our biopharmaceuticals business to develop innovative and improved ways to treat haemophilia and other rare bleeding disorders, growth hormone deficiency and inflammatory diseases.
Haemophilia is an inherited or acquired bleeding disorder that prevents blood from clotting. The 400,000 people worldwide living with haemophilia lack, either partially or completely, an essential clotting factor needed to form blood clots. Without treatment, uncontrolled internal bleeding can cause stiffness, pain, severe joint damage and even death.
We developed our factor VIIa product NovoSeven® for the more than 4,000 people with haemophilia who have developed inhibitors, or antibodies, to their normal treatment. NovoSeven® provides effective treatment for rapid control of bleeding episodes and has been a major advancement in the treatment of haemo philia. It was a significant innovation when launched in 1996 and remains the only room-temperature-stable recombinant bypassing agent available for people with haemophilia with inhibitors.
NovoSeven® is also the only recombinant medication approved for the treatment of bleeding episodes in acquired factor VII deficiency and, in Europe, Glanzmann’s thrombasthenia. Due to its special properties, 14 years after launch, NovoSeven® achieved sales growth of 14% in Danish kroner.
We are continuing to look for ways to make NovoSeven® more convenient and more effective. During 2010, a new 8 mg vial was approved in the US and Europe. The new size, offered in addition to the 1, 2 and 5 mg vials, offers an extra element of convenience to initiate the treatment of bleeds faster. In the event of a bleeding episode, every second counts. With the availability of the 8 mg vial, many people living with haemophilia with inhibitors will need fewer vials to stop a bleed. This will allow faster reconstitution and initiation of the treatment, possibly resulting in faster bleeding control.
Changing
Possibilities
in Haemophilia®
Commitment
to science
In
support of our ambition to help people with haemophilia lead the lives they
desire, we have the broadest pipeline of research and development projects
in our industry. In addition to improving current treatment for people with
inhibitors, we are developing the next generation of activated recombinant
factor VII products and expanding our research in haemophilia and other rare
bleeding disorders.
We are developing compounds targeting faster and more efficient treatment of episodic bleedings, long-acting compounds to allow less frequent prophylactic infusions and products administered by the more convenient subcutaneous route.
To offer new therapeutic approaches to the prevention and treatment of bleeding based on the established efficacy of recombinant factor VIIa, we are developing:
| • | a new recombinant factor VIIa, analogue with a faster onset of action and the ability to form even stronger clots in a shorter time |
| • | a long-acting derivative of recombinant factor VIIa |
The same long-acting molecule is also being investigated for subcutaneous use. The phase 2 trial for the fast-acting analogue was completed in 2010, while the phase 2 trials for the long-acting derivative of factor VIIa are ongoing.
During 2010, we also made progress in the development of solutions for the broad range of haemophilia and other rare bleeding disorders.
|
|
Key
events in biopharmaceuticals in 2010 |
|
| • | Phase 3 trial results for the first recombinant factor XIII analogue to treat congenital factor XIII deficiency. | |
| • | Phase 2 trial results for our fast-acting next-generation factor VIIa analogue. | |
| • | Phase 1 trial completed for our long-acting recombinant treatment for people with haemophilia B intended for prophylactic use. | |
| • | Launch of HERO (Haemophilia Experiences, Results and Opportunities), an international initiative exploring psychological and social issues in haemophilia. | |
| • | New prefilled Norditropin® FlexPro® for growth hormone deficiency with audible click to confirm dosing launched in Europe, Japan and the US. | |
| • | New Vagifem® 10µg, the lowest effective dose available for the treatment of vaginal atrophy, was launched in Canada, Portugal, Scandinavia, the UK and the US. | |
Novo Nordisk Annual Report 2010 37
| Biopharmaceuticals |
| • | For haemophilia A: In order to improve upon existing treatments using factor VIII we had to first produce a third-generation factor VIII compound. We expect to launch this new recombinant treatment within the next few years while we seek to develop a longer-acting formulation. |
| • | For haemophilia B: During 2010, we completed a phase 1, proof-of-concept trial for a long-acting recombinant factor IX compound intended for once-weekly use. |
| • | For congenital factor XIII deficiency: The only existing treatment option for the 600 people diagnosed with congenital factor XIII deficiency is made from human plasma, which may involve risk of bloodborne viruses. Our phase 3 clinical trial for a recombinant factor XIII treatment was completed in 2010 and we expect to file for regulatory approval in 2011. |
Commitment
to community
Through
our Changing Possibilities in Haemophilia® initiatives we seek to
partner with physicians, healthcare policy-makers and the wider haemophilia
community to help build a better tomorrow for people with haemophilia. We
want to increase understanding of haemophilia and improve access to diagnosis,
care and treatment.
To strengthen our understanding of life with haemophilia, we initiated a psychosocial study to determine how to best support the needs of people with haemophilia. We presented the preliminary findings of HERO (Haemophilia Experiences, Results and Opportunities), an international survey into the psychological and social effects of haemophilia, at the World Federation of Haemophilia Congress in Buenos Aires, Argentina, in July 2010.
The first phase of the study includes interviews with 150 people with haemophilia, caregivers and healthcare professionals in seven countries. The initial findings underline the importance of psychosocial issues in haemophilia, which include family tensions, problems of integration at school, fear of stigmatisation, and concerns about integration at work, forming relationships and starting a family.
When completed in 2011, the full inquiry will include responses from over 1,200 people from 12 countries and will be the largest international study into the social and psychological aspects of life with haemophilia. More information about HERO is available at changingpossibilities.com.
Another Novo Nordisk initiative to better understand the needs of people with haemophilia and support caregivers in providing education about haemophilia and treatment optimisation – early treatment to reduce joint damage – is BRUNO (Being Receptive, Understanding the Needs of Others). Activities in 2010 included the launch of a children’s book with all royalties donated to the Haemophilia Society and the Novo Nordisk Haemophilia Foundation, and educational materials developed in conjunction with an advisory board of nurses.
Through the Novo Nordisk Haemophilia Access to Insight programme we offer support to encourage doctors and scientists to enhance their understanding of haemophilia and share best practices to improve care. We also sponsor an accredited training programme, the Haemophilia Academy, as well as scientific sessions at major congresses.
Novo Nordisk was an official sponsor of World Haemophilia Day, 17 April, in 2010. The designated day, the 21st annual event, promoted awareness and understanding of haemophilia. Novo Nordisk-sponsored activities were carried out in more than 25 countries, reaching thousands of people.
People with haemophilia with inhibitors from around the world met in Buenos Aires in June 2010 to inaugurate the Novo Nordisk Global Haemophilia with Inhibitors Patient Council. By establishing a platform for ongoing communication with people with haemophilia and their representatives, we hope to better understand the unmet needs of people with haemophilia and how Novo Nordisk may be able to help. The group generated ideas about information and support that would benefit people with inhibitors. In the US we have also established the Consumer Council to offer better services to people with haemophilia. Their activities have helped develop the Uninhibited Achievement award, the Inhibitor Education Summits and the Voices Uninhibited newsletter. The US Changing Possibilities Coalition also has a Facebook site with several hundred fans.
During 2010, we launched a number of programmes in Turkey to create awareness and build public support for haemophilia. To create positive awareness of haemophilia, particularly among healthcare providers, we were the main sponsor of the National Patient Summit and symposium. More than 300 people with haemophilia, healthcare professionals, associations and Ministry of Health officials participated in the April event.
Our ambition is to improve access to diagnosis, care and treatment for people with haemophilia. We are working with the haemophilia community to support the next generation of haemophilia physicians, improve access to care today and increase treatment options in the future.
To give surgical teams the expertise to perform needed surgeries for people with haemophilia, we launched an ongoing training programme in 2009. People with haemophilia may suffer joint damage from repeated bleeds. Joint replacement may end chronic pain, but there are special challenges in performing surgery on people with haemophilia with inhibitors. Four-day Excellence Training Programmes are being held at haemophilia centres worldwide and each session accommodates up to four surgical teams.
As our focus on haemophilia has expanded, so has our commitment to the global haemophilia community. We established the Novo Nordisk Haemophilia Foundation (NNHF) in 2005 to address the significant need for improving haemophilia care and treatment in developing countries, where haemophilia is not a healthcare priority and many people with haemophilia go undiagnosed or are inadequately treated.
Our donations to the NNHF, including 15 million Danish kroner in 2010, support projects and fellowships in 25 developing and emerging countries. By working with partners across all areas of the haemophilia community with local ownership of projects, the NNHF aims to ensure the sustainability of development programmes. See nnhf.org for more information.
38 Novo Nordisk Annual Report 2010
| Biopharmaceuticals |
In determining which business areas our company should operate in, we consider our core strengths in protein engineering and chronic disease treatment as well as the potential for global market leadership
Growth
hormone therapy
Novo
Nordisk is moving into a global leadership position in human growth hormone
therapy, building on a 40-year commitment that leverages on our expertise with
protein molecules. Norditropin®
is the only liquid growth hormone product with a formulation that does not require
refrigeration after first use and is available in a prefilled, ready-to-use
device.1
Growth hormone deficiency affects the pituitary gland. If the pituitary gland does not produce enough growth hormone, growth is slower than normal. Children need growth hormone to grow to normal height. In adults, growth hormone is needed to maintain a good quality of life and the proper amounts of body fat, muscle and bone to reduce metabolic complications. Research shows that children of short stature are more likely to experience difficulty at school, while adults with growth hormone deficiency have poorer-than-average health-related quality of life.
We have drawn on our technological expertise in injection devices to improve growth hormone delivery systems and products. During 2010, we launched a new auto-injection device, Norditropin® FlexPro®. Among the new key features is an easy-push dose button and a new, end-of-dose ‘click’, which lets the user know, when the full dose has been delivered. The pen is also shorter, aiming to make it easier to hold and handle for both children and adults.
Hormone
replacement therapy
Vagifem®
10µg, a lower-dose version of Vagifem®,
was introduced in the US, Canada and Europe in 2010. VagiFem®
builds on our 35 years of experience with hormone treatment for menopausal symptoms.
Our long-standing position is that hormone replacement therapy for women should
be prescribed at the lowest effective dose and for a time period consistent
with treatment goals and risks assessed for the individual woman.
Treating
inflammatory diseases
Leveraging
our protein expertise to help people with other types of chronic disorders and
add diversity to our clinical pipeline of products, we now have projects in
early clinical development targeting chronic inflammation. In 2010, we initiated
our first phase 2 clinical inflammation trials in people with rheumatoid arthritis.
For more information on our strategy for treating inflammatory diseases, see
pp 17–19.
1. Only the 5µg and 10µg sizes are room-temperature stable.
 |
Recruitment
for clinical trials |
Interview
with Mads Krogsgaard Thomsen,
Novo Nordisk’s chief science officer
What
are the current challenges in conducting clinical trials?
Regulators
and health technology assessors are requiring more evidence of both the clinical
and economic benefit to society of new experimental medicine. Expectations are
increasing, and to meet them we are having to increase the number and size of
our clinical trial programmes. This makes trials longer and more complex to
manage as we are required to obtain more information from patients and to provide
more information to agencies.
It is particularly critical that we have sufficient patients from different ethnic groups enrolled in a trial to live up to the requirements of regulatory agencies with different wishes. Otherwise, we may end up having too few patients overall, or of a specific category, at the end of a trial to obtain final evaluative data and product approval. This can lead to non-approval or a delay in approval increasing the overall costs for the drug candidate and preventing us from serving patients in the best possible way.
How
does this affect clinical trials for
treatment of rare bleeding disorders?
For
orphan diseases, patient recruitment presents a unique challenge. In the case
of congenital factor XIII deficiency, there are only 600 people worldwide
who have this condition. Even for trials with only 40 patients, we are required
to run a global clinical trial programme to ensure worldwide approval.
What
are the difficulties in conducting
clinical trials on a global scale?
We
conduct clinical trials in more than 50 countries, and there are many advantages
in doing this. It is important that treatments are assessed in different patient
populations, as required by regulators. To ensure that all patients are treated
equally, we have one set of global clinical standard operating procedures
in compliance with regulatory guidelines. We conduct internal reviews, set
up safety and ethical committees for all trials, train our staff and investigators,
and perform both internal and external audits. Also, we need to ensure that
Good Clinical Practice guidelines exist in all countries involved in any given
trial.
What
is Novo Nordisk doing to ensure sufficient recruitment?
Novo
Nordisk has a long history of preparing and designing successful patient recruitment
strategies across therapy areas – from identifying patients, requesting
referrals from physicians, contacting and screening patients, and obtaining
informed consent, to training the staff responsible for patient recruitment.
In fact, developing solutions for trial recruitment has become a competitive
advantage for our organisation.
Novo Nordisk Annual Report 2010 39
| Corporate governance, remuneration and leadership |
|
The framework for our corporate governance consists of internal principles as well as external regulations and codes, including compliance with applicable securities laws in Denmark and the US and the Danish Recommendations on Corporate Governance. Our values are consistent with principles of good governance, and the Novo Nordisk Way forms the foundation of our internal values-based framework. Our company is part of the Novo Group, a family of independent companies with a common history and shared values. The holding company of the Novo Group is Novo A/S, a Danish limited liability company wholly owned by the Novo Nordisk Foundation, a commercial, profit-making foundation. Governance
structure Shareholder
rights Each A share (= nominal value 1 Danish krone) carries 1,000 votes and each B share (= nominal value 1 Danish krone) carries 100 votes. Special rights attached to A shares include pre-emptive subscription rights in the event of an increase of the A share capital and pre-emptive purchase rights in the event of a sale of A shares and priority dividend if the dividend is below 0.5%, while B shares take priority for dividends between 0.5% and 5% and B shares take priority for winding-up proceedings. Shareholders have ultimate authority over the company and exercise their right to make decisions regarding Novo Nordisk at general meetings, either in person, by proxy, or by correspondence. Resolutions can generally be passed by a simple majority, while resolutions to amend the Articles of Association are subject to adoption by at least two-thirds of votes cast and capital represented unless other requirements as to the adoption are imposed by the Danish Companies Act. We are not aware of the existence of any agreements with or between shareholders on the exercise of votes or control. 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. General meetings are held in English; however, proposals may be submitted and questions asked in Danish. Simultaneous |
interpretation between English and Danish is available and the meeting is webcast. The Board has decided that, currently, general meetings should be conducted by physical attendance. Shareholders may, however, vote by proxy or correspondence, either electronically or by mail. General meetings must be called with three to five weeks’ notice. The meeting agenda is sent out with a combined proxy and voting form, allowing shareholders to vote on each agenda item separately. A shareholder’s right to attend and vote at a general meeting is determined by shares owned at the record date, which is one week prior to the general meeting. All shareholders may, no later than six weeks prior to the general meeting, request that proposals for resolution be included on the agenda. The deadline for applying for an admission card to a general meeting is no later than three days prior to the general meeting. All documents relating to general meetings are published on Novo Nordisk’s website at least three weeks prior to the general meeting. The
Novo Nordisk Foundation Our
values are consistent with principles of good governance, and the Novo
Nordisk Way forms the foundation of our internal values-based framework. Board
of Directors The Board has 11 members, seven of whom are elected by shareholders at general meetings and four by employees. Shareholder-elected board members serve a one-year term and may be re-elected at the general meeting. According to the Rules of Procedure of the Board, members must retire at the first general meeting after reaching the age of 70. At the 2011 Annual General Meeting, it will be proposed to include the retirement age in the articles, in accordance with the Danish Corporate Governance Recommendations. |
40 Novo Nordisk Annual Report 2010
| Corporate governance, remuneration and leadership |
|
A proposal for nomination of board members is presented by the Chairmanship to the Board, taking into account required competences as stated in the competency profile, and reflecting the result of a self-assessment process facilitated by external consultants. The assessment process is based on written questionnaires and evaluates whether each board member and executive participates actively in board discussions and contributes with independent judgement. The self-assessment conducted in 2010 resulted in an update of the competency profile of the Board and an enhanced focus on the succession preparedness of the Board, which entailed the establishment of an ad hoc nomination team. In nominating candidates, the Chairmanship seeks to achieve a balance between renewal and continuity. The competency profile is reviewed annually by the Board and disclosed on the Novo Nordisk website. The majority of the shareholder-elected board members, four out of seven, are independent as defined by the Danish Corporate Governance Recommendations. See p 50. Under Danish law, Novo Nordisk 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 from among themselves four board members. Board members elected by employees serve a four-year term and have the same rights, duties and responsibilities as shareholder-elected board members. The Board met seven times during 2010. Five meetings were attended by all board members; two of the members had to be excused from attending one meeting each during the year. With the exception of agenda items reserved for the Board’s internal discussion at each meeting, executives attend and may speak, without voting rights, at board meetings to ensure that the Board is adequately informed of the company’s operations. Executives provide regular feedback from meetings with investors to give board members an insight into major shareholders’ views of the company. Chairmanship 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. It also reviews the fixed asset investment portfolio. Other tasks include recommending the remuneration of directors and executives, and suggesting candidates for election by the general meeting. In practice, the Chairmanship has the roles and responsibilities of a nomination committee and a remuneration committee, and presents proposals to the Board. The Board has not established separate remuneration and nomination committees, believing that each board member must have the opportunity to contribute actively to discussions and have access to all relevant information about remuneration and nomination. Novo Nordisk is therefore not in compliance with the Danish Corporate Governance Recommendations, which recommend separate remuneration and nomination committees. An ad hoc nomination team, |
consisting of the Chairmanship, Jørgen Wedel and Henrik Gürtler, has been established to identify new board candidates. In March 2010, the Board re-elected Sten Scheibye as chairman and Göran A Ando as vice chairman. See novonordisk.com/about_us for a detailed report on the Chairmanship’s activities. Research
and development facilitator Audit
Committee In 2010, the Audit Committee held four meetings attended by all members except for one occasion when one member was excused. The Audit Committee assists the Board of Directors with oversight of the external auditors, the internal audit function, complaints regarding financial fraud and business ethics, the financial reporting process and post-investment reviews. The Audit Committee conducts a self-assessment annually, evaluating whether each member participates actively in discussions and contributes with independent judgement. In March 2010, the Board re-elected Kurt Anker Nielsen as chairman and re-elected Jørgen Wedel and Hannu Ryöppönen as members of the Audit Committee. See novonordisk.com/about_us for a detailed report on the Audit Committee’s activities. Compliance
hotline Management
of the company Remuneration
principles |
Novo Nordisk Annual Report 2010 41
| Corporate governance, remuneration and leadership |
|
Assurance External
audit The assurance process also serves to verify the internal control processes of the non-financial information reported in the annual report. Internal
audit |
ensure that the function works independently of 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. Internal
control The Board alsp requires that non-financial information be subject to the same types of internal control procedures required of financial data under the Sarbanes–Oxley Act. Novo Nordisk has been working towards this objective since 2008. |
Corporate governance codes and practices
New Danish Corporate Governance Recommendations were introduced in 2010. Novo Nordisk is following the majority of the recommendations, but does not follow three:
| • | The Board does not have a nomination committee. |
| • | The Board does not have a remuneration committee. |
| • | Existing executive employment contracts allow for severance of more than 24 months' fixed base salary plus pension contribution. |
Explanations for deviations from these recommendations are given on pp 41 and 48–49.
To be in line with four other recommendations, the following proposals will be presented to the 2011 Annual General Meeting regarding:
| • | retirement age for board members |
| • | approval of remuneration principles by the general meeting |
| • | explanation of remuneration package elements and |
| • | a provision allowing the company to reclaim variable remuneration paid on the basis of data proved to be manifestly misstated. |
As a foreign listed private issuer Novo Nordisk is in compliance with the corporate governance standards of the New York Stock Exchange, where Novo Nordisk’s ADRs are listed.
The applicable corporate governance codes for each exchange and a detailed 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 has disclosed the mandatory corporate governance report at novonordisk.com/about_us/corporate_governance/compliance.asp.
42 Novo Nordisk Annual Report 2010
| Corporate governance, remuneration and leadership |
Novo Nordisk has developed a dynamic approach to risk management to ensure that key risks are proactively identified, assessed and managed. Maintaining and monitoring a systematic integrated process to continually assess business risks is the responsibility of Executive Management. The Risk Management Board, with representatives of Senior Management from all parts of the business and chaired by the chief financial officer, sets the strategic direction for the risk management process and challenges the overall risk and control profile for Novo Nordisk.
Our policy for risk management is to proactively manage risk to ensure continued growth of our business and to protect our people, assets and reputation. This means that we:
| • | utilise an effective and integrated risk management system while maintaining business flexibility |
| • | identify and assess material risks associated with our business |
| • | monitor, manage and mitigate risks. |
Our risk willingness is not one specific figure or formula, but varies depending upon the specific category of risk. The main characteristics of Novo Nordisk’s risk willingness are:
| • | We innovate to help patients and to defeat diabetes by finding better methods of diabetes prevention, detection and treatment. We will offer products and services in other areas where we can make a difference. We accept the commensurate high level of risk involved in bringing new treatments or innovative products to market that meet the needs of patients. |
| • | Because the safety of patients is paramount, vigorous efforts are made to reduce product safety risks to the lowest level possible. |
| • | A conservative approach is taken to the management of financial risks. |
| • | We strive to reduce supply chain risks through proactive business continuity planning, regular inspections and back-up facilities. |
| • | We have a zero tolerance approach to unethical business conduct. |
Risk
management process
All major
business areas are required to report their most significant financial and non-financial
risks quarterly, along with plans or processes to manage these risks. The Risk
Office, acting as the secretariat for the Risk Management Board, challenges
business areas about reported risks. Reported risks are then consolidated into
a ranking and assessment of the company’s key risks. This information is
presented to the Risk Management Board and then to Executive Management, the
Audit Committee and the Board of Directors.
All assessments of risk take into account the likelihood of an event and its potential impact on the business. Impacts are quantified and assessed in terms of potential financial loss and reputational damage. Risks are assessed both as gross risk and
net risk. The assessment of gross risk assumes that no mitigating actions have been implemented, whereas net risk assessment takes into account mitigating actions already implemented and their anticipated effect. Enterprise risk management increases our ability to assess and understand risks separately and in relation to each other from a global perspective but with local control.
More information on our risk management process is available at annualreport2010.novonordisk.com.
The risks that we deem of greatest importance to our business are categorised and described below. They are not, however, ranked. Many of these issues are also discussed elsewhere in the report.
Market
risks
Price
pressures
As healthcare
costs have risen, outstripping the pace of economic growth, there is increasing
economic, political and regulatory pressure to contain pharmaceutical prices.
The impact of the global economic recession has further exacerbated this trend.
In the US, healthcare reform legislation passed in 2010 is likely to impact Novo Nordisk’s business. However, uncertainties regarding the implementation of specific aspects of the legislation remain. In Europe, the impact of the global economic recession coupled with budget deficits in many countries is increasing the pressure on governments to control healthcare spending even more tightly. As a result, we are operating in an increasingly challenging environment with significant price pressure.
It is increasingly imperative to document treatment benefits to ensure that innovation is properly valued. Novo Nordisk has therefore increased the number of clinical and health-economic studies to substantiate the benefits of our products for patients and society, particularly for improved diabetes treatment. For more information on how Novo Nordisk is addressing pricing challenges, see p 5.
Biosimilar
competition
The market
for therapeutic proteins is becoming more attractive to biosimilar producers
as regulatory rules in Europe and the US are changing to allow producers to
introduce biosimilar products when patents for branded products expire. This
development is exacerbated by increasing pressures on governments to contain
healthcare costs.
Novo Nordisk anticipates that the expiration of certain patents could impact sales within the next five years. However, with the continuing transition from human to modern insulins, an increasing proportion of Novo Nordisk’s diabetes care sales in major markets are protected by patents.
Traditionally, earlier generations of insulin products have been off patent for years so this is a risk with which Novo Nordisk is familiar and has considerable experience addressing. Biosimilar products have been present on the European market for several decades but have had only a marginal impact. In countries such as India and China, where the company has long had biosimilar competition, Novo Nordisk has maintained an insulin volume market share of approximately 60%.
Novo Nordisk Annual Report 2010 43
| Corporate governance, remuneration and leadership |
|
Research
and development risks In our experience, there is less than a 35% chance for a product candidate in phase 1 in the pipeline ultimately being approved for marketing, while the chance of success is around 40% for Phase 2 product candidates and rises to around 70% for Phase 3 but there remains significant uncertainty regarding the timing and success of the regulatory approval process. The reasons for delays or failure include, for instance: failure of the product candidate in non-clinical studies due to safety concerns; problems in completing formulation and other testing and work necessary to support a regulatory approval process; adverse reactions to the product candidate or indications of other safety concerns; failure in clinical trial data to support the safety or efficacy of the product candidate; inability to manufacture, in a timely and cost-efficient manner, sufficient quantities of the product candidate for development or commercialisation activities; and failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate or the facilities in which it is manufactured. Due to the risks and uncertainties involved in progressing through non-clinical development and clinical trials, and the time and cost involved in obtaining regulatory approvals, we cannot reasonably estimate the nature, timing, completion dates and costs of the efforts necessary to complete the development. |
Production
and quality risks Continued growth depends on our ability to develop and offer better treatments to patients. Risk
of product recalls For information on Novo Nordisk’s product recalls during 2010, see p 10. |
Managing risks throughout our business
44 Novo Nordisk Annual Report 2010
| Corporate governance, remuneration and leadership |
|
Financial
risks Tax
disputes Ethical
risks Legal
risks We will enforce our patent rights in cases of infringement when this is deemed advisable by Executive Management after careful analysis of the commercial and legal aspects of enforcement. Similar analysis is applied to decisions to defend Novo Nordisk’s patent rights against other legal challenges. Significant legal issues related to intellectual property are included in note 31 on pp 87–88. Other
legal risks 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. We must 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. |
Further information on significant legal issues related to product liability claims, business practices and government investigations is included in note 31 on pp 87–88. |
Novo Nordisk Annual Report 2010 45
| Corporate governance, remuneration and leadership |
In keeping with our aim to attract, retain and motivate talented employees in the competitive global pharmaceutical market, compensation at Novo Nordisk is designed to be competitive, reward short-term as well as long-term performance and align interests with those of shareholders.
On a global basis, compensation packages are guided by five broad principles:
| • | A
total rewards approach In addition to a fixed base salary, incentives and benefits, non-financial remuneration such as continuing education, career progression and working environment are important elements of the ‘total rewards’ package. |
| • | Market
linked Salaries, incentives and benefits are positioned and maintained at the level required to be competitive in local markets, generally between the local market median and upper quartile. Novo Nordisk also provides adequate life insurance, healthcare and pension provisions irrespective of local competitive practice. |
| • | Performance
linked There is a transparent, direct link between employee performance and remuneration. Variable pay is used to reward performance, with base pay increases reflecting market conditions. |
| • | Transparency Clear communication of remuneration programmes is a priority, and all costs associated with compensation practices are known and publicly disclosed. |
| • | Flexibility Subject to corporate governance or legal requirements, flexibility is encouraged. Flexible solutions must be cost neutral to Novo Nordisk, and adequate levels of insurance must be maintained. |
Remuneration
principles
In accordance
with new Danish Corporate Governance Recommendations introduced during 2010,
Novo Nordisk’s remuneration principles have been revised to include incentive
guidelines, a description of the reasons for choosing the individual components
of the remuneration, a description of the criteria on which the balance between
the individual components of the remuneration is based and a right for Novo
Nordisk to reclaim in full or in part variable remuneration paid on the basis
of data subsequently determined to be manifestly misstated. The revised remuneration
principles will be presented for approval to the 2011 Annual General Meeting.
Executive
remuneration
Executive
remuneration is proposed by the Chairmanship and subsequently approved by the
Board. On an annual basis, executive remuneration is assessed against a benchmark
of large Danish companies with international activities, and this information
is supplemented by information on remuneration levels for similar positions
in the international pharmaceutical industry.
The 2010 assessment of executive remuneration against a benchmark of large Danish companies determined that elements in the remuneration package are below market benchmark levels. At the 2011 Annual General Meeting it will be proposed that executive remuneration be assessed against a benchmark of relevant Scandinavian companies and European pharmaceutical companies, which in size and complexity are more similar to Novo Nordisk.
Remuneration packages for executives consist of a fixed base salary, a cash-based incentive, share-based incentive, a pension contribution and other benefits. The split between fixed and variable remuneration is intended to result in a reasonable part of the salary being linked to performance, while promoting sound long-term business decisions to achieve the company’s objectives. The aggregate maximum amount that may be granted as incentives for a given year is currently equal to 12 months’ fixed base salary plus pension contribution.
Remuneration package components
46 Novo Nordisk Annual Report 2010
| Corporate governance, remuneration and leadership |
| Fixed
base salary The fixed base salary accounts for approximately 40–60% of the total value of the remuneration package. The base salary is intended to attract and retain executives with the professional and personal competences required to drive the company’s performance. |
Cash-based
incentive The cash-based incentive is designed to incentivise individual performance and short-term achievements in line with company needs, and may result in a maximum annual payout per year equal to four months’ fixed base salary plus pension contribution. The performance targets are individualised and are linked to the |
Executive Management and other members of the Senior Management Board
|
DKK
million
|
Fixed
base
salary |
|
Cash-based
incentive |
|
Pensions
|
|
Other
benefits |
|
Share-based
incentive |
Total
remuneration |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
Executive Management:
|
||||||||||||
|
Lars
Rebien Sørensen
|
6.6 | 2.2 | 2.2 | 0.3 | – | 11.3 | ||||||
|
Jesper
Brandgaard
|
4.3 | 1.4 | 1.4 | 0.3 | – | 7.4 | ||||||
|
Lise
Kingo
|
3.9 | 1.3 | 1.3 | 0.3 | – | 6.8 | ||||||
|
Kåre
Schultz
|
4.7 | 1.6 | 1.7 | 0.3 | – | 8.3 | ||||||
|
Mads
Krogsgaard Thomsen
|
4.3 | 1.4 | 1.4 | 0.3 | – | 7.4 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Management in total
|
23.8 | 7.9 | 8.0 | 1.5 | – | 41.2 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
members of the Senior Management Board in total1
|
62.5 | 23.8 | 20.9 | 10.3 | – | 117.5 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint
pool2
|
64.3 | 64.3 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2009 Executive Management: | ||||||||||||
| Lars Rebien Sørensen | 6.5 | 1.6 | 2.0 | 0.3 | – | 10.4 | ||||||
| Jesper Brandgaard | 4.2 | 1.4 | 1.4 | 0.3 | – | 7.3 | ||||||
| Lise Kingo | 3.8 | 1.3 | 1.2 | 0.3 | – | 6.6 | ||||||
| Kåre Schultz | 4.5 | 1.2 | 1.6 | 0.3 | – | 7.6 | ||||||
| Mads Krogsgaard Thomsen | 4.2 | 1.0 | 1.3 | 0.3 | – | 6.8 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management in total | 23.2 | 6.5 | 7.5 | 1.5 | – | 38.7 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other members of the Senior Management Board in total1 | 59.5 | 20.5 | 19.6 | 10.6 | – | 110.2 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Joint pool2 | 54.4 | 54.4 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | The total remuneration for 2010 includes remuneration to 24 senior vice presidents, three of whom retired or left the company. The 2010 remuneration for these three senior vice presidents is included in the table above whereas a settlement of 25 million Danish kroner is not included. The total remuneration for 2009 includes remuneration to 25 senior vice presidents, none of whom resigned during the year. |
| 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 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 (2009: 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. |
Management’s
long-term incentive programme
The
shares allocated to the joint pool for 2007 (166,292 shares) were released to
the individual participants following approval by the Board of Directors on
1 February 2011. Based on the share price at the end of 2010, the value of the
released shares is as follows:
|
Value
as at 31 December 2010 of shares released 1 February 2011
|
Number
of shares |
Market
value1
(DKK million) |
||
|
|
|
|
|
|
| Executive Management: | ||||
| Lars Rebien Sørensen | 14,851 | 9.3 | ||
| Jesper Brandgaard | 9,893 | 6.2 | ||
| Lise Kingo | 9,893 | 6.2 | ||
| Kåre Schultz | 9,893 | 6.2 | ||
| Mads Krogsgaard Thomsen | 9,893 | 6.2 | ||
|
|
|
|
|
|
| Executive Management in total | 54,423 | 34.1 | ||
|
|
|
|
|
|
| Other members of the Senior Management Board in total2 | 88,722 | 55.8 | ||
|
|
|
|
|
| 1. | The market value of the shares released in 2011 is based on the Novo Nordisk B share price at the end of 2010 of DKK 629. |
| 2. | In addition, 23,147 shares (market value: DKK 14.6 million) were released to retired members of management. |
Lars Rebien Sørensen serves as a member of the Board of Directors of Danmarks Nationalbank, from which he received remuneration of DKK 20,000 in 2010 (compared with DKK 10,000 in 2009), as a member of the Board of Directors of DONG Energy A/S, from which he received remuneration of DKK 175,000 in 2010 (compared with DKK 175,000 in 2009) and as a member of the Supervisory Board of Bertelsmann AG, from which he received remuneration of EUR 50,000 in 2010 (compared with EUR 87,500 in 2009). Until March 2010, Mr Sørensen also served as a member of the Board of Directors of ZymoGenetics, Inc. but did not receive any remuneration. Jesper Brandgaard serves as chairman of the Board of SimCorp A/S, from which he received remuneration of DKK 794,425 in 2010 (compared with DKK 856,400 in 2009). Kåre Schultz serves as a member of the Board of Directors of LEGO A/S, from which he received remuneration of DKK 300,000 in 2010 (compared with DKK 250,000 in 2009). As of 11 October 2010, Kåre Schultz has also served as Chairman of the Board of Directors of Unibrew A/S, from which he received remuneration of DKK 156,250 in 2010. Mads Krogsgaard Thomsen serves as a member of the Board of Directors of Cellartis AB, from which he received remuneration of SEK 50,000 in 2010 (SEK 50,000 in 2009).
Novo Nordisk Annual Report 2010 47
| Corporate governance, remuneration and leadership |
|
goals in the company's Balanced Scorecard. Short-term targets for the chief executive officer are fixed by the chairman of the Board of Directors while the targets for executive vice presidents are fixed by the chief executive officer. The Chairmanship of the Board evaluates the degree of achievement for each member of Executive Management based on input from the chief executive officer. At the 2011 Annual General Meeting, it will be proposed that cash-based incentives may result in a maximum payout equal to six months’ fixed base salary plus pension contribution. Share-based
incentives At the beginning of each year, the Board decides whether to establish a long-term incentive programme for that year. The programme is based on a calculation of shareholder value creation compared with planned performance. Aligned 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 (WACC) requirement on average invested capital. A proportion of the calculated shareholder value creation is allocated to a joint pool for the participants, which include Executive Management and other members of the Senior Management Board. The Senior Management Board consists of five members of Executive Management and senior vice presidents. The allocation to the joint pool may, subject to the Board’s assessment, be reduced in the event of lower-than-planned performance in significant research and development projects or key sustainability projects. Targets for non-financial performance may include achievement of certain milestones by set dates. Once the joint pool has been approved by the Board, the total cash amount is converted into Novo Nordisk B shares at market price, which is calculated as the average trading price on NASDAQ OMX Copenhagen in the open trading window following the release of financial results for the prior year. The shares in the joint pool are allocated to the participants on a pro rata basis: the chief executive officer has three units, executive vice presidents have two units each and other members of the Senior Management Board have one unit each.
|
Joint pool shares for a given year are locked up for three years before they are transferred to 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. In the lock-up period, the Board may remove shares from the joint pool in the event of lower-than-planned value creation in subsequent years. In the lock-up period, the value of the joint pool will change depending on the development in the share price, aligning the interests of participants with those of shareholders. Compensation at Novo Nordisk is designed to be competitive, reward performance and align interests with those of shareholders. Pension Other
benefits Severance
payment In addition to the notice period, executives are entitled to a severance payment. Existing 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. In the case of termination by Novo Nordisk for other reasons, the severance payment is three months’ |
Executive remuneration
48 Novo Nordisk Annual Report 2010
| Corporate governance, remuneration and leadership |
|
fixed base salary plus pension contribution per year of employment as an executive and taking into account previous employment history. In no event will severance be less than 12 months’ or more than 36 months’ fixed base salary plus pension contribution. For new employment contracts, severance 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. Remuneration
of board members The results of the annual remuneration benchmark are presented to the Board at its October meeting. In 2010, the benchmark of board remuneration included 15 large listed companies from the OMX C20 index, Nordic companies and European pharmaceutical companies. It was determined that the remuneration of Novo Nordisk’s board was broadly in line with other Danish companies, though these had not been adjusted for a period, but below Nordic companies and significantly below board remuneration at other European pharmaceutical companies. The gap was most significant for the remuneration of the chairman and vice chairman. At the December meeting the Board agrees on recommendations for remuneration levels for the next financial year. In connection with the approval of the annual report, the Board approves the recommendation for actual remuneration for the past financial year and endorses the recommendation on remuneration levels for the current financial year. This is then presented to the annual general meeting for approval.
|
Each board member receives a fixed base fee annually. The chairman receives 2.5 times the base fee and the vice chairman receives 1.5 times the base fee. Service on the Audit Committee entitles board members to an additional fee. The Audit Committee chairman receives 1.25 times the base fee and Audit Committee members receive 0.5 times the base fee. Following the benchmark conducted in 2010, the proposal put forward at the 2011 Annual General Meeting will include a change in the base fee from 400,000 to 500,000 Danish kroner, and a change in the multiplier for the board vice chairman from 1.5 to 2.0 times the base fee and for the board chairman from 2.5 to 3.0 times the base fee. At the same time it will be proposed to change the multiplier for the Audit Committee chairman from 1.25 to 1.0 times the base fee. Individual board members may take on specific ad hoc tasks outside their normal duties. In such cases the Board determines a fixed fee for the work carried out related to those tasks. Travel
and other expenses Expenses such as travel and accommodation in relation to board meetings as well as relevant education are reimbursed. Variable
remuneration |
Board
of Directors
In 2010,
the base fee for members of the Board of Directors was DKK 400,000 (DKK 400,000
in 2009).
|
2010
|
2009
|
|||||||||||||||
|
|
|
|||||||||||||||
| DKK million |
Board
of
Directors |
Fee
for
ad hoc tasks and committee work1 |
Travel
allowance |
Total
|
Board
of
Directors |
Fee
for
ad hoc tasks and committee work1 |
Travel
allowance |
Total
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sten Scheibye (chairman of the Board) |
1.0
|
–
|
–
|
1.0
|
1.0
|
–
|
–
|
1.0
|
||||||||
| Göran A Ando (vice chairman of the Board)2 |
0.6
|
0.3
|
0.1
|
1.0
|
0.6
|
0.3
|
0.1
|
1.0
|
||||||||
| Kurt Anker Nielsen (chairman of the Audit Committee) |
0.4
|
0.5
|
–
|
0.9
|
0.4
|
0.5
|
–
|
0.9
|
||||||||
| Jørgen Wedel (Audit Committee member) |
0.4
|
0.2
|
0.1
|
0.7
|
0.4
|
0.2
|
0.1
|
0.7
|
||||||||
| Hannu Ryöppönen (Audit Committee member) |
0.4
|
0.2
|
0.1
|
0.7
|
0.3
|
0.2
|
0.1
|
0.6
|
||||||||
| Anne Marie Kverneland |
0.4
|
–
|
–
|
0.4
|
0.4
|
–
|
–
|
0.4
|
||||||||
| Henrik Gürtler |
0.4
|
–
|
–
|
0.4
|
0.4
|
–
|
–
|
0.4
|
||||||||
| Johnny Henriksen3 |
0.1
|
–
|
–
|
0.1
|
0.4
|
–
|
–
|
0.4
|
||||||||
| Ulrik Hjulmand-Lassen4 |
0.3
|
–
|
–
|
0.3
|
–
|
–
|
–
|
–
|
||||||||
| Pamela J Kirby |
0.4
|
–
|
0.1
|
0.5
|
0.4
|
–
|
0.1
|
0.5
|
||||||||
| Stig Strøbæk |
0.4
|
–
|
–
|
0.4
|
0.4
|
–
|
–
|
0.4
|
||||||||
| Søren Thuesen Pedersen |
0.4
|
–
|
–
|
0.4
|
0.4
|
–
|
–
|
0.4
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
5.2
|
1.2
|
0.4
|
6.8
|
5.1
|
1.2
|
0.4
|
6.7
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | Ad hoc fees are for the research and development facilitator. |
| 2. | Göran A Ando was re-elected research and development facilitator in March 2010 and served throughout 2010. |
| 3. | Resigned as of March 2010. |
| 4. | Employee-elected board member as of March 2010. |
Novo Nordisk Annual Report 2010 49
| Corporate governance, remuneration and leadership |
|
Sten
Scheibye, picture 1 Göran
A Ando, picture 2 |
medical qualifications and his extensive executive background within the international pharmaceutical industry. Dr Ando became vice chairman of the Novo Nordisk A/S Board in 2006. Henrik
Gürtler, picture 3 Ulrik
Hjulmand-Lassen, picture 4 Pamela
J Kirby, picture 5 |
| Name (male/female) |
First
elected
|
Term
|
Nationality
|
Date
of birth
|
Independence3
|
| Sten Scheibye (m) |
2003
|
2011
|
Danish
|
3
Oct 1951
|
Independent
|
| Göran A Ando (m) |
2005
|
2011
|
Swedish
|
6
Mar 1949
|
Not
independent1
|
| Henrik Gürtler (m) |
2005
|
2011
|
Danish
|
11
Aug 1953
|
Not
independent1
|
| Ulrik Hjulmand-Lassen2 (m) |
2010
|
2014
|
Danish
|
28
Apr 1962
|
Not
independent
|
| Pamela J Kirby (f) |
2008
|
2011
|
British
|
23
Sep 1953
|
Independent
|
| Anne Marie Kverneland2 (f) |
2000
|
2014
|
Danish
|
24
Jul 1956
|
Not
independent
|
| Kurt Anker Nielsen (m) |
2000
|
2011
|
Danish
|
8
Aug 1945
|
Not
independent1,4
|
| Søren Thuesen Pedersen2 (m) |
2006
|
2014
|
Danish
|
18
Dec 1964
|
Not
independent
|
| Hannu Ryöppönen (m) |
2009
|
2011
|
Finnish
|
25
Mar 1952
|
Independent4,5
|
| Stig Strøbæk2 (m) |
1998
|
2014
|
Danish
|
24
Jan 1964
|
Not
independent
|
| Jørgen Wedel (m) |
2000
|
2011
|
Danish
|
10
Aug 1948
|
Independent4,5
|
| 1. | Member of management or the Board of Novo A/S or the Novo Nordisk Foundation. |
| 2. | Elected by employees of Novo Nordisk. |
| 3. | In accordance with section 5.4.1 of Recommendations on Corporate Governance designated by NASDAQ OMX Copenhagen. |
| 4. | Mr Nielsen, Mr Ryöppönen and Mr Wedel qualify as independent Audit Committee members as defined by the US Securities and Exchange Commission (SEC). |
| 5. | Mr Ryöppönen and Mr Wedel qualify as independent Audit Committee members as defined under part 8 of the Danish Act on Approved Auditors and Audit Firms. |
50 Novo Nordisk Annual Report 2010
| Corporate governance, remuneration and leadership |
|
within the international pharmaceutical and biotech industries, particularly in respect of marketing, strategic planning, clinical trials and life cycle management related to pharmaceutical products. Anne
Marie Kverneland, picture 6 Kurt
Anker Nielsen, picture 7 Søren
Thuesen Pedersen, picture 8 Hannu
Ryöppönen, picture 9 |
 |
Novo Nordisk Annual Report 2010 51
| Corporate governance, remuneration and leadership |
|
Helsinki, Finland (1976). The special competences possessed by Mr Ryöppönen that are important for the performance of his duties are his international executive background and thorough understanding of managing finance operations in global organisations, in particular in relation to accounting, financing and capital market issues, but also his experience within private equity and mergers & acquisitions (M&A). Mr Ryöppönen has been a member of the Audit Committee at Novo Nordisk A/S since 2009 and is designated as financial expert under both Danish and US law.4,5 Stig
Strøbæk, picture 10 |
Jørgen
Wedel, picture 11 Jørgen Wedel was executive vice president of the Gillette Company, US, until 2001. He was responsible for Commercial Operations, International, and was a member of Gillette’s Corporate Management Group. From 2004 to 2008, he was a board member of ELOPAK AS, Norway. Mr Wedel has an MSc in Commerce and Business Administration from the Copenhagen Business School, Denmark (1972), majoring in accounting and financing, and an MBA from the University of Wisconsin, US (1974). The special competences possessed by Mr Wedel that are important for the performance of his duties are his background as a senior sales and marketing executive in a global consumer-oriented company within the fast-moving consumer goods industry, as well as particular insight into the US market. In addition, he possesses competences in relation to auditing and accounting. Mr Wedel has been a member of the Audit Committee at Novo Nordisk A/S since 2005, and is designated as financial expert under both Danish and US law.4,5 |
Organisational structure: Senior Management Board
| 1. | Employee total includes those who work for NNE Pharmaplan A/S, NNIT A/S and Steno Diabetes Center A/S. Morten Nielsen (NNE Pharmaplan) and Per Kogut (NNIT) are also members of the Senior Management Board. |
| 2. | From 1 January 2011. |
52 Novo Nordisk Annual Report 2010
| Corporate governance, remuneration and leadership |
|
Lars
Rebien Sørensen, picture A Jesper
Brandgaard, picture B Lise
Kingo, picture C Kåre
Schultz, picture D Mads
Krogsgaard Thomsen, picture E |
 |
Novo Nordisk Annual Report 2010 53
| Shares and capital structure |
|
We aim to communicate openly with stakeholders about the company’s financial and business development as well as strategies and targets. Through active dialogue, we seek to obtain fair and efficient pricing of the Novo Nordisk share. To keep investors updated on financial and operating performance as well as the progress of clinical programmes, Novo Nordisk hosts conference calls with Executive Management following key events and the release of financial results, which are also accessible by webcast. Executive Management and Investor Relations also travel extensively to ensure that all investors with a major holding of Novo Nordisk shares can meet with Novo Nordisk on a regular basis and that a high number of smaller investors or potential investors also have access to the company. Roadshows are primarily held in major European and North American financial centres. A wide range of other investor activities are held during the year. Investors and financial analysts are welcome to visit our headquarters in Bagsværd, Denmark, as well as our regional offices. In 2010, meetings with investor groups were held in Princeton, US, Beijing, China, Zürich, Switzerland, and Tokyo, Japan. Investors and analysts are also invited every year to presentations of the most recent scientific results in connection with the two major scientific diabetes conferences, the American Diabetes Association and the European Association for the Study of Diabetes. We expect to host similar investor events in 2011. Share
price performance In 2010, Novo Nordisk’s share price increased more than the MSCI Europe Health Care Index, which increase by 5% measured in Danish kroner. Measured in US dollars, the price of the Novo Nordisk B share increased by 76%, above the dollar gain of 1% for the MSCI US Health Care Index. The positive development of the company’s share price is most likely a reflection of a relatively solid position in a growing market with strong operating performance and ongoing progress in research and development. In 2010, factors believed to have impacted the share price positively include a solid operating performance bolstered by steady sales growth, driven by modern insulins and Victoza®. Continuous productivity increases also contributed to a solid improvement in the gross margin of around 1.2 percentage points in 2010. |
As the global launch of Victoza® progresses, with the product now commercially available in 16 European countries, the US, Canada, Japan and five countries in International Operations, the encouraging launch performance and significant expansion of the GLP-1 class in key markets such as the US, UK, Germany and France by the end of 2010, are believed to have impacted the share price positively. Within research and development particular focus has been on the development of Degludec and DegludecPlus, Novo Nordisk’s two new-generation insulin projects, where the phase 3 clinical programme has provided encouraging results, is also believed to have had a positive impact on the share price. Capital
structure As decided at the 2010 Annual General Meeting, a reduction of the company’s B share capital, corresponding to approximately 3.2% of the total share capital, was effected in June 2010 by cancellation of treasury shares. This enables Novo Nordisk to
|
54 Novo Nordisk Annual Report 2010
| Shares and capital structure |
|
continue to buy back shares without exceeding the limit for a total holding of treasury shares of 10% of the total share capital. In 2010, Novo Nordisk repurchased shares worth 9.5 billion Danish kroner, compared to 6.5 billion kroner in 2009. During 2010 the share repurchase programme was expanded twice, each time by 1 billion kroner. The first expansion was announced on 5 August at the half-year financial release due to improved outlook for free cash flow generation in 2010. The second expansion was announced on 27 October due to the divestment of Novo Nordisk’s ownership in ZymoGenetics, Inc. For 2011, Novo Nordisk has initiated a new share repurchase programme with an expected total repurchase value of B shares amounting to a cash value of 10 billion kroner. 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’. This programme gives the selected financial institutions the mandate to purchase shares independently of Novo Nordisk A/S. At the 2011 Annual General Meeting, the Board of Directors will propose a further reduction of the company’s B share capital, |
corresponding to approximately 3.3% of the total share capital, by cancellation of 20 million treasury shares. Share
capital and ownership According to the Articles of Association of the Foundation, the A shares cannot be divested by Novo A/S or the Foundation. As of 31 December 2010, Novo A/S also held 45,512,800 kroner of B share capital. Each holding of 1 krone of the A share capital carries 1,000 votes. Each holding of 1 krone of the B share capital carries 100 votes. With 25.5% of the total share capital, Novo A/S controls 72.8% of the total number of votes, excluding treasury shares. The total market value of Novo Nordisk’s B shares excluding treasury shares was 292 billion kroner at the end of 2010. Novo Nordisk’s B shares are quoted on the NASDAQ OMX Copenhagen and on the New York Stock Exchange in the form of ADRs. The B shares are traded in units of 1 krone 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 B shares are in bearer form, no official record of all shareholders exists. In March, Novo Nordisk’s B shares were delisted from the London Stock Exchange. Based on available sources of information on the company’s shareholders as of 31 December 2010, it is estimated that shares were distributed as shown in the charts on this page. At the end of 2010, the free float was 69.8%. Form
20-F Payment
of dividends |
Novo Nordisk Annual Report 2010 55
| Shares and capital structure |
The proposed dividend payments for Novo Nordisk shares are noted in the table below:
Proposed dividend payment for 2010
| A shares of DKK 1 |
B
shares of DKK 1
|
ADRs |
|
|
||
| DKK 10.00 | DKK 10.00 |
DKK
10.00
|
|
|
|
|
Analyst
coverage
Our company
is currently covered by more than 35 analysts, including the major global
investment banks that regularly produce research reports about Novo Nordisk.
A list of analysts covering Novo Nordisk can be found at novonordisk.com/investors.
Internet
Our homepage
for investors is novonordisk.com/investors. It
includes historical and updated information about Novo Nordisk’s activities:
press releases from 1995 onwards, financial and non-financial results, a calendar
of investor-relevant events, investor presentations, background information
and recent annual reports.
Financial calendar 2011
Annual general meeting 23 March 2011
|
|
|
|
| Dividend |
B
shares
|
ADRs
|
| Ex-dividend | 24 March 2011 | 24 March 2011 |
| Record date | 28 March 2011 | 28 March 2011 |
| Payment | 29 March 2011 | 5 April 2011 |
|
|
||
| Announcement of financial results | ||
| First three months |
28
April 2011
|
|
| Half year |
4
August 2011
|
|
| First nine months |
27
October 2011
|
|
| Full year |
2
February 2012
|
|
56 Novo Nordisk Annual Report 2010
| Consolidated financial and non-financial statements 2010 |
Novo Nordisk Annual Report 2010 57
|
Income
statement and Statement of comprehensive income for the year ended 31
December
|
Consolidated financial statements |
Income statement and Statement of comprehensive income for the year ended 31 December
|
DKK
million
|
Note
|
2010
|
2009
|
2008
|
||||
|
|
|
|
|
|
|
|
|
|
| Income statement | ||||||||
| Sales | 2, 3 | 60,776 | 51,078 | 45,553 | ||||
| Cost of goods sold | 2, 4, 6 | 11,680 | 10,438 | 10,109 | ||||
|
|
|
|
|
|
|
|
|
|
| Gross profit | 49,096 | 40,640 | 35,444 | |||||
| Sales and distribution costs | 2, 4, 6 | 18,195 | 15,420 | 12,866 | ||||
| Research and development costs | 2, 4, 6 | 9,602 | 7,864 | 7,856 | ||||
| Administrative expenses | 2, 4, 5, 6 | 3,065 | 2,764 | 2,635 | ||||
| Licence fees and other operating income, net | 2, 4 | 657 | 341 | 286 | ||||
|
|
|
|
|
|
|
|
|
|
| Operating profit | 18,891 | 14,933 | 12,373 | |||||
| Share of profit/(loss) of associated companies, net of tax | 13 | 1,070 | (55 | ) | (124 | ) | ||
| Financial income | 7 | 382 | 375 | 1,127 | ||||
| Financial expenses | 8 | 2,057 | 1,265 | 681 | ||||
|
|
|
|
|
|
|
|
|
|
| Profit before income taxes | 18,286 | 13,988 | 12,695 | |||||
| Income taxes | 9 | 3,883 | 3,220 | 3,050 | ||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year | 14,403 | 10,768 | 9,645 | |||||
|
|
|
|
|
|
|
|
|
|
| Earnings per share: | ||||||||
| Basic earnings per share (DKK) | 10 | 24.81 | 17.97 | 15.66 | ||||
| Diluted earnings per share (DKK) | 10 | 24.60 | 17.82 | 15.54 | ||||
|
|
|
|
|
|
|
|
|
Statement of comprehensive income
| Net profit for the year |
14,403
|
10,768
|
9,645
|
|||||
| Other comprehensive income | ||||||||
| Deferred gains/(losses) on cash flows hedges arising during the period | (643 | ) | 352 | (940 | ) | |||
| Transfer of deferred gains/(losses) from previous year of cash flows hedges | ||||||||
| recognised in the Income statement as part of financial income/(expenses) | (422 | ) | 900 | (615 | ) | |||
| Exchange rate adjustment of investments in subsidiaries | 300 | 528 | (473 | ) | ||||
| Share of other comprehensive income of associated companies, net of tax | (9 | ) | 9 | 39 | ||||
| Gains/(losses) on available-for-sale financial assets (equity investments) | (14 | ) | (1 | ) | (9 | ) | ||
| Other | 27 | 10 | (45 | ) | ||||
| Tax on other comprehensive income, income/(expense) |
9
|
346 | (25 | ) | 81 | |||
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income for the year, net of tax | (415 | ) | 1,773 | (1,962 | ) | |||
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | 13,988 | 12,541 | 7,683 | |||||
|
|
|
|
|
|
|
|
|
58 Novo Nordisk Annual Report 2010
|
Balance
sheet at 31 December
|
Consolidated financial statements |
Balance sheet at 31 December
|
DKK
million
|
Note
|
2010
|
2009
|
|||
|
|
|
|
||||
| Assets | ||||||
| Intangible assets | 11 | 1,458 | 1,037 | |||
| Property, plant and equipment | 12 | 20,507 | 19,226 | |||
| Investments in associated companies | 13 | 43 | 176 | |||
| Deferred income tax assets | 20 | 1,847 | 1,455 | |||
| Other non-current financial assets | 14 | 254 | 182 | |||
|
|
|
|
||||
| Total non-current assets | 24,109 | 22,076 | ||||
|
|
|
|
||||
| Inventories | 15 | 9,689 | 10,016 | |||
| Trade receivables | 14, 16 | 8,500 | 7,063 | |||
| Tax receivables | 650 | 799 | ||||
| Other current assets | 17 | 2,403 | 1,962 | |||
| Marketable securities and derivative financial instruments | 14 | 4,034 | 1,530 | |||
| Cash at bank and in hand | 14 | 12,017 | 11,296 | |||
|
|
|
|
||||
| Total current assets | 37,293 | 32,666 | ||||
|
|
|
|
||||
| Total assets | 61,402 | 54,742 | ||||
|
|
|
|
|
Equity and liabilities
| Share capital | 18 | 600 | 620 | |||
| Treasury shares | 18 | (28 | ) | (32 | ) | |
| Retained earnings | 36,097 | 34,435 | ||||
| Other reserves | 296 | 711 | ||||
|
|
|
|
||||
| Total equity | 36,965 | 35,734 | ||||
|
|
|
|
||||
| Non-current debt | 14, 19 | 504 | 970 | |||
| Deferred income tax liabilities | 20 | 2,865 | 3,010 | |||
| Retirement benefit obligations | 21 | 569 | 456 | |||
| Provisions for other liabilities | 22 | 2,023 | 1,157 | |||
|
|
|
|
||||
| Total non-current liabilities | 5,961 | 5,593 | ||||
|
|
|
|
||||
| Current debt and derivative financial instruments | 23 | 1,720 | 418 | |||
| Trade payables | 14 | 2,906 | 2,242 | |||
| Tax payables | 1,252 | 701 | ||||
| Other current liabilities | 24 | 7,954 | 6,813 | |||
| Provisions for other liabilities | 22 | 4,644 | 3,241 | |||
|
|
|
|
||||
| Total current liabilities | 18,476 | 13,415 | ||||
|
|
|
|
||||
| Total liabilities | 24,437 | 19,008 | ||||
|
|
|
|
||||
| Total equity and liabilities | 61,402 | 54,742 | ||||
|
|
|
|
|
Novo Nordisk Annual Report 2010 59
|
Statement
of cash flows for the year ended 31 December
|
Consolidated financial statements |
Statement of cash flows for the year ended 31 December
|
DKK
million
|
Note
|
2010
|
2009
|
2008
|
||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year |
14,403
|
10,768
|
9,645
|
|||||
| Adjustments for non-cash items: | ||||||||
| Income taxes | 9 | 3,883 | 3,220 | 3,050 | ||||
| Depreciation, amortisation and impairment losses | 6 | 2,467 | 2,551 | 2,442 | ||||
| Net interest, (income)/expense | 7, 8 | 265 | 71 | (385 | ) | |||
| Other adjustments for non-cash items | 25 | 1,834 | 859 | 614 | ||||
| Income taxes paid | (3,436 | ) | (1,998 | ) | (3,172 | ) | ||
| Interest received | 218 | 284 | 656 | |||||
| Interest paid | (252 | ) | (98 | ) | (247 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Cash flows before change in working capital | 19,382 | 15,657 | 12,603 | |||||
| (Increase)/decrease in trade receivables and other current assets | (1,878 | ) | (740 | ) | (700 | ) | ||
| (Increase)/decrease in inventories | 327 | (405 | ) | (591 | ) | |||
| Increase/(decrease) in trade payables and other current liabilities | 1,805 | 921 | 1,228 | |||||
| Currency translation | 43 | (55 | ) | 323 | ||||
|
|
|
|
|
|
|
|
|
|
| Cash flows from operating activities | 19,679 | 15,378 | 12,863 | |||||
|
|
|
|
|
|
|
|
|
|
| Proceeds from the divestment of ZymoGenetics, Inc. | 1,155 | – | – | |||||
| Purchase of intangible assets and non-current financial assets | 11, 14 | (521 | ) | (433 | ) | (264 | ) | |
| Proceeds from sale of property, plant and equipment | 68 | 1 | 18 | |||||
| Purchase of property, plant and equipment | 12 | (3,376 | ) | (2,632 | ) | (1,772 | ) | |
| Net change in marketable securities | (2,913 | ) | – | 466 | ||||
| Dividend received | 13 | 8 | 18 | 170 | ||||
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities | (5,579 | ) | (3,046 | ) | (1,382 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Repayment of non-current debt | – | – | (153 | ) | ||||
| Purchase of treasury shares | 18 | (9,498 | ) | (6,512 | ) | (4,717 | ) | |
| Proceeds from sale of treasury shares | 18 | 678 | 117 | 295 | ||||
| Dividends paid to the Parent company’s owners | 10 | (4,400 | ) | (3,650 | ) | (2,795 | ) | |
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities | (13,220 | ) | (10,045 | ) | (7,370 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Net cash flows | 880 | 2,287 | 4,111 | |||||
| Unrealised gain/(loss) on exchange rates, included in cash and cash equivalents | 46 | 21 | (2 | ) | ||||
|
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents | 926 | 2,308 | 4,109 | |||||
| Cash and cash equivalents at the beginning of the year | 26 | 11,034 | 8,726 | 4,617 | ||||
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at the end of the year | 11,960 | 11,034 | 8,726 | |||||
|
|
|
|
|
|
|
|
|
|
| Additional information: | ||||||||
| Cash and cash equivalents at the end of the year | 26 | 11,960 | 11,034 | 8,726 | ||||
| Marketable securities at the end of the year | 14 | 3,926 | 1,013 | 997 | ||||
| Undrawn committed credit facilities 1) | 4,473 | 4,465 | 7,451 | |||||
|
|
|
|
|
|
|
|
|
|
| Financial resources at the end of the year | 20,359 | 16,512 | 17,174 | |||||
|
|
|
|
|
|
|
|
|
|
| Cash flows from operating activities | 19,679 | 15,378 | 12,863 | |||||
| Cash flows from investing activities | (5,579 | ) | (3,04) | ) | (1,382 | ) | ||
| Net change in marketable securities | 2,913 | – | (466 | ) | ||||
|
|
|
|
|
|
|
|
|
|
| Free cash flows | 17,013 | 12,332 | 11,015 | |||||
|
|
|
|
|
|
|
|
|
|
| 1) | At year-end, the Group had an undrawn committed credit facility amounting to DKK 4,473 million (DKK 4,465 million in 2009). The undrawn committed credit facility is a EUR 600 million facility committed by a number of Danish and international banks. The facility matures in 2012. |
60 Novo Nordisk Annual Report 2010
|
Statement
of changes in equity 31 December
|
Consolidated financial statements |
Statement of changes in equity at 31 December
|
Share
capital
|
Treasury
shares
|
Retained
earnings
|
|
Other
reserves
|
Total
|
|||||||||||
|
|
|
|
Exchange
rate
adjust-
ments
|
Deferred
gain/(loss)
on
cash
flows
hedges
|
Tax
and
other
adjust-
ments
|
Total
other
reserves
|
||||||||||
| DKK million | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2010 | ||||||||||||||||
| Balance at the beginning of the year |
620
|
(32
|
)
|
34,435
|
271
|
393
|
47
|
711
|
35,734 | |||||||
| Net profit for the year |
14,403
|
14,403 | ||||||||||||||
| Other comprehensive income for the year, | ||||||||||||||||
| net of tax |
300
|
(1,065
|
)
|
350
|
(415
|
)
|
(415 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year |
14,403
|
300
|
(1,065
|
)
|
350
|
(415
|
)
|
13,988 | ||||||||
| Transactions with owners, recognised | ||||||||||||||||
| directly in equity: | ||||||||||||||||
| Dividends (refer to note 10) |
(4,400
|
)
|
(4,400 | ) | ||||||||||||
| Share-based payments (refer to note 28) |
463
|
463 | ||||||||||||||
| Purchase of treasury shares (refer to note 18) |
(20
|
)
|
(9,478
|
)
|
(9,498 | ) | ||||||||||
| Sale of treasury shares (refer to note 18) |
4
|
674
|
678 | |||||||||||||
| Reduction of the B share capital | ||||||||||||||||
| (refer to note 18) |
(20
|
)
|
20
|
0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the end of the year |
600
|
(28
|
)
|
36,097
|
571
|
(672
|
)
|
397
|
296
|
36,965 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DKK million |
Share
capital
|
Treasury
shares
|
Retained
earnings
|
Other reserves |
Total
|
|||||||||||
|
|
||||||||||||||||
|
Exchange
rate
adjust-
ments
|
Deferred
gain/(loss)
on
cash
flows
hedges
|
Tax
and
other
adjust-
ments
|
Total
other
reserves
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2009 | ||||||||||||||||
| Balance at the beginning of the year |
634
|
(26
|
)
|
33,433
|
(256 |
)
|
(859
|
)
|
53
|
(1,062
|
)
|
32,979 | ||||
| Net profit for the year |
10,768
|
10,768 | ||||||||||||||
| Other comprehensive income for the year, | ||||||||||||||||
| net of tax | 527 |
1,252
|
(6
|
)
|
1,773
|
1,773 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year |
10,768
|
527 |
1,252
|
(6
|
)
|
1,773
|
12,541 | |||||||||
| Transactions with owners, recognised | ||||||||||||||||
| directly in equity: | ||||||||||||||||
| Dividends (refer to note 10) |
(3,650
|
)
|
(3,650 | ) | ||||||||||||
| Share-based payments (refer to note 28) |
259
|
259 | ||||||||||||||
| Purchase of treasury shares (refer to note 18) |
(22
|
)
|
(6,490
|
)
|
(6,512 | ) | ||||||||||
| Sale of treasury shares (refer to note 18) |
2
|
115
|
117 | |||||||||||||
| Reduction of the B share capital | ||||||||||||||||
| (refer to note 18) |
(14
|
)
|
14
|
0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the end of the year |
620
|
(32
|
)
|
34,435
|
271 |
393
|
47
|
711
|
35,734 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Novo Nordisk Annual Report 2010 61
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
Notes
to the Consolidated financial statements
|
1 Basis of preparation of the consolidated financial statements The Consolidated financial statements 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 add itional Danish disclosure requirements for the annual reports of listed companies. The Consolidated financial statements have been prepared on the historical cost basis except for the revaluation of available-for-sale financial assets such as equity investments and marketable securities measured at fair value through Other comprehensive income and derivative financial instruments measured at fair value through Income statement. Key accounting estimates and assumptions The use of reasonable estimates is an essential part of the preparation of the Consolidated financial statements in conformity with IFRS as issued by the IASB and IFRS as endorsed by the European Union. Management is required to make estimates and assumptions 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. These form the basis for making judgements about the reported financial position and result of operations and cash flow that are not readily apparent from other sources. Actual results could differ from these estimates. 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 regards the following to be the key accounting estimates and assumptions used in the preparation of the Consolidated financial statements. Sales
rebates and provisions 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. Sales discounts and sales rebates are predominantly issued in Region North America. In that region, significant sales rebates and discounts comprise rebates from sales covered by Medicare and Medicaid, the US state and federal programmes for public healthcare insurance. Provisions for 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 in ter pretation 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 six months later. Due to the time lag, the rebate adjustments to sales in any particular period may incorporate revisions of accruals for prior periods. |
Customer rebates are offered to a number of managed healthcare plans. These rebate programmes imply that the customer receives a rebate after attaining certain performance parameters relating to product purchases, formulary status and pre-established market share milestones relative to competitors. Since they are contractually agreed upon, rebates are esti mated 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 prices lower than the list price 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 incurring the liability. The carrying amount of provisions for sales rebates is DKK 4,364 million as at 31 December 2010. Please refer to note 22 for further information on provisions for sales rebates. Furthermore, please refer to note 3 for a gross-to-net sales reconciliation. 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 better information becomes available. Indirect
production costs (IPCs) IPCs are measured based on 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 IPCs, including utilisation levels, production lead time etc could have an im pact on the gross margin and the overall valuation of inventories. The carrying amount of IPCs on inventory is DKK 5,090 million as at 31 December 2010. Please refer to note 15 for further information. Allowances
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 the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required in future periods. Management analyses trade receivables and examines historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful trade receivables. The carrying amount of allowances for doubtful trade receivables is DKK 627 million as at 31 December 2010. Please refer to note 16 for further information. Provisions
and contingencies 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. The carrying amount of deferred income tax assets and deferred income tax liabilities is DKK 1,847 million and DKK 2,865 million respectively as at 31 December 2010. Please refer to note 20 for further information. |
62 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
Returned
products
The Group
has recorded provisions for expected product returns. The provision is based
on an analysis of the estimated rate of return, which is determined based on
historical experience of customer returns or con sidering any other relevant
factors.
The carrying amount of provision for product returns is DKK 534 million as at 31 December 2010. Please refer to note 22 for further information.
Other
provisions
Other provisions
consist of various types of provisions, including provisions for legal disputes.
Management makes judgements about provisions and contingencies, including the
probability of pending and potential future litigation outcomes that by their
very nature are dependent on inherently uncertain future events. When determining
likely outcomes of litigations etc, Management considers the evaluation of external
counsel knowledgeable about each case, as well as known outcomes in case law.
Provisions for pending litigations are recognised as part of other provisions. The carrying amount of other provisions is DKK 1,769 million as at 31 December 2010. Please refer to note 22 for further information and note 31 for a description of significant litigations pending.
Although Management believes that the total provisions for legal proceedings are adequate based upon currently available information, there can be no assurance that there will not be an increase in the scope of these matters or that any future lawsuits, claims, proceedings or investigations will not be material.
Accounting policies
The accounting policies set out below have been applied con sistently in the preparation of the Consolidated financial statements for all the years presented.
Adoption
of new and revised IFRSs
Novo Nordisk
has adopted all new or amended and revised accounting standards and interpretations
(‘IFRSs’) issued by IASB and IFRSs endorsed by the European Union
effective for the accounting year 2010. Based on an analysis made by Novo Nordisk,
the application of the new IFRSs has not had a material impact on the Consolidated
financial statements in 2010 and we do not anticipate any significant impact
on future periods from the adoption of these new IFRSs.
New
IFRSs that have been issued but not yet come into effect
In addition
to the above, IASB has issued a number of new or amended and revised accounting
standards and interpretations (‘IFRSs’) which have been endorsed by
the European Union but not yet come into effect. Novo Nordisk has thoroughly
assessed the impact of these IFRSs that are not yet effective and determined
that we do not anticipate any significant impact on the Consolidated financial
statements from the adoption of these standards.
Furthermore, IASB has issued IFRS 9 ‘Financial Instruments’ which is required to be adopted by 1 January 2013. 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. IFRS 9 has not been endorsed by the European Union, and a decision to do so is currently postponed. Novo Nordisk has assessed the impact of the standard and determined that it will not have significant impact on the Consolidated financial statements.
Principles
of consolidation
The Consolidated
financial statements incorporate the financial statements of Novo Nordisk A/S
and entities controlled by Novo Nordisk A/S. The results of subsidiaries acquired
or disposed of during the year are included in the consolidated income statement
from the effective date of acquisition and up to the effective date of disposal,
as appropriate. Comparative figures are not adjusted for disposed or acquired
companies.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group policies. All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation.
When the Group looses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting as equity investment or, when applicable, the cost on initial recognition of an investment in associated companies.
Translation
of foreign currencies
Functional
and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The Consolidated financial statements are presented in Danish kroner, which is the functional and presentation currency of the Parent company.
Translation
of transactions and balances
Foreign
currency transactions are translated into the functional currency using the
exchange rates prevaling at the dates of the transactions. Foreign exchange
gains and loses 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, are included in the fair value reserve in Other comprehensive income.
Translation
of Group companies
Financial
statements of foreign subsidiaries are translated into Danish kroner at the
exchange rates ruling at the end of the reporting period for assets and liabilities,
and at average exchange rates for Income statement items.
All effects of currency translation are recognised in the Income statement with the exception of exchange gains and losses arising from:
| • | the translation of foreign subsidiaries’ net assets at the beginning of the year 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 translation of investments in associated companies |
The above exchange gains and losses are recognised in Other comprehensive income.
Sales
and revenue recognition
Sales are
measured at the fair value of the consideration received or receivable. Sales
are reduced for realised and estimated customer returns, rebates and other similar
allowances.
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
| • | the Group has transferred to the buyer the significant risks and rewards of ownership of the goods |
| • | the Group 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 and |
| • | the costs incurred or to be incurred in respect of the transaction can be measured reliably |
Provisions for rebates and discounts granted to government agencies, whole salers, retail pharmacies, managed care and other customers are recorded as a reduction of revenue 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. The sales rebate accruals and provisions are included in Other current liabilities and Provisions for other liabilities.
Novo Nordisk Annual Report 2010 63
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
Where there is a historical experience or a reasonably accurate estimate of expected future returns can otherwise be made, a provision for estimated sales returns is recorded. 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 or existing 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.
Provisions for revenue deductions are adjusted to actual amounts as rebates, discounts and returns are processed.
Research
and development
All internal
research costs are expensed in the Income statement as incur red.
Due to the long duration and significant uncertainties relating to the development of new products, including risks associated with clinical trials and regulatory approval, it is concluded that the Group’s internal development costs in general do not meet the capitalisation criteria. This is because the technical feasibility criteria are not considered to be fulfilled until a high probability of regulatory approval can be determined. Hence, internal research and development costs are expensed in the Income statement as incurred. The same principles are used for property, plant and equipment with no alternative use developed as part of a research and development project. However, property, plant and equipment with alternative use or used for general research and development purposes are capitalised and depreciated over their estimated useful lives.
For acquired in-process research and development projects, the effect of probability is reflected in the cost of the asset, and the probability recogni tion criteria are therefore always considered satisfied. As the cost of acquired in-process research and development projects can often be measured reliably, these projects fulfil the capitalisation criteria as intangible assets upon acquisition. However, further internal development costs subsequent to acquisition are treated in the same way as other internal development costs.
Licence
fees and other operating income
Licence
fees and other operating income comprise licence fees and income of a secondary
nature in relation to the main activities of the Group. Non-Group 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 non-recurring income items in respect
of sale of intellectual property rights.
Intangible
assets
Goodwill
Goodwill
represents any cost in excess of identifiable net assets, measured at fair value,
in the acquired company. Goodwill recorded under Intangible assets is related
to subsidiaries.
Patents
and licences
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 estimated useful life of intangible assets is regularly reviewed.
The amortisation of patents and licenses begins after regulatory approval has
been obtained, which is the point in time from which the intangible asset is
available for use in the production of the product.
Other
intangible assets
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 the Group
are recognised as intangible assets under Other intangible assets if the recognition
criteria are met. The computer software has to be a significant business system
and the expenditure will lead to the creation of a durable asset.
When assessing whether an internally generated intangible asset qualifies for recognition, it is required that the related internal development project is at a sufficiently advanced stage and that the project is economically viable. 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.
Property,
plant and equipment
Property,
plant and equipment are measured at historical cost less accumulated 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 the Group 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 (borrowings) 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 –16 years |
| • | Land: not depreciated |
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.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Income statement.
Leasing
Leases
are classified as finance leases whenever the terms of the lease substantially
transfer all the risks and rewards of ownership to the lessee. All other leases
are classified as operating leases. The use of finance leases in the Consolidated
financial statements is immaterial and they are part of property, plant and
equipment.
Operating lease payments are recognised in the Income statement as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
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 by the Group 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 or tangible assets |
| • | Changes or anticipated changes in participation rates or reimbursement policies. |
If the carrying amount of goodwill, intangible assets or other non-current 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.
64 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
Intangible assets and other non-financial assets (other than goodwill) that have suffered impairments are reviewed at each reporting date for possible reversal of the impairment.
Investments
in associated companies
Investments
in associated companies are accounted for under the equity method of accounting
(ie at the respective share of the associated com panies’ net asset value
applying Group accounting policies). Goodwill relating to associated companies
is recorded as part of the investment under Investments in associated companies.
Financial
assets
The Group
classifies its investments in the following categories:
| • | Available-for-sale financial assets |
| • | Loans and receivables |
| • | Financial assets at fair value (derivatives) |
The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments on initial recognition and re-evaluates this 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 the Group has transferred substantially
all risks and rewards of ownership.
Available-for-sale
financial assets
Available-for-sale
financial assets consist of equity investments and market able securities and
are included in Other non-current assets unless Management intends to dispose
of the investment within 12 months of the end of the reporting period. If that
would be the case, the current part is included as Other current assets.
Unrealised gains and losses arising from changes in the fair value of finan-cial 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 cost if no reliable valuation model can be applied (such as unlisted shares).
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 current assets are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for allowances. Provision for allowances of trade receivables is made when there is objective evidence that the Group 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.
Financial
assets at fair value (derivatives)
The Group
uses forward exchange contracts, currency options, interest rate swaps and cross-currency
swaps to hedge forecast transactions, assets and liabilities, and net foreign
currency investments in foreign subsidiaries in accordance with the specific
rules of IAS 39 ‘Financial Instruments: Recognition and Measurement’.
Upon initiation of the contract, the Group designates each derivative financial contract that qualifies for hedge accounting as:
| • | Hedges of the fair value of a recognised asset or liability or a firm commitment (fair value hedge), or |
| • | Hedges of the fair value of a forecast financial transaction (cash flow hedge), or |
| • | 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 and currency swap hedges recognised as 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 and interest rate swaps 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 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.
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, the Group uses currency option hedges of forecast transactions. Currency options are initially recognised at cost, which equals fair value of considerations paid, and subsequently re-measured 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 is transferred from Other comprehensive income to the Income statement as a reclas-sification 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 detailed requirements for allowing hedge accounting are recognised directly in the Income statement under Financial income or Financial expenses.
The accumulated net fair value of derivatives is presented as Marketable securities and financial instruments if positive or Current debt and financial instruments if negative.
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, the Group 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 interest rate swaps, currency swaps and un listed 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 2010 65
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
|
Inventories
If the expected sales price less completion costs and costs to execute sales (net realisable value) is lower than the carrying amount, a write-down is recognised for the amount by which the carrying amount exceeds its net realisable value. 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 value to its recoverable amount and recorded as research and development costs. At the point when a high probability of regulatory approval is determined, the provision recorded is reversed, up to the original cost. Tax 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 the elimination of the temporary differences. Unremitted earnings are retained by subsidiaries for reinvestment. No provision is made for income taxes that would be payable upon the distribution of such earnings. Employee
benefits Pensions Actuarial gains and losses are recognised as income or expenses when the net cumulative unrecognised actuarial gains and losses for each individual plan at the end of the previous reporting period exceed 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognised over the expected average remaining working lives of the employees participating in the plans. Past service costs are allocated over the average period until the benefits vest. Pension assets are only recognised to the extent that the Group is able to derive future economic benefits such as refunds from the plan or reductions of future contributions. The Group’s contributions to the defined contribution plans are charged to the Income statement in the year to which they relate. |
Share-based
compensation The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or shares granted, excluding the impact of any non-market vesting conditions. The fair value is fixed at grant date. Non-market vesting conditions are included in assumptions about the number of options or shares that are expected to vest. At the end of each reporting period, the Group 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 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. Liabilities Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings 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 bor rowings using the effective interest method. Borrowings are classified as Current debt unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period. Provisions
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. Treasury
shares Statement
of cash flows
|
66 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
|
2 Segment information Operating segments are reported in a manner consistent with the internal reporting provided to Executive Management and the Board of Directors. Business segments The Group operates in two business segments based on different 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, and oral antidiabetic products (OAD). 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. |
No operating segments have been aggregated to form the above reportable business segments. Management monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated on the basis of operating profit consistent with the Consolidated financial statements. Group financing (including financial expenses and financial income) 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 overheads allocated systematically between the segments. Licence fees and other operating income has been allocated to the two segments based on the same principle. Segment assets comprise the assets that are applied directly to the activities of the segment, including intangible assets, property, plant and equipment, non-current financial assets, inventories, trade receivables and other receivables. No single customer represents more than 10% of the total sales. |
Business segments
|
DKK
million
|
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
sales
|
Diabetes care | Biopharmaceuticals | Total | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
| NovoRapid® / NovoLog® | 11,900 | 9,749 | 7,830 | |||||||||||||||
| NovoMix® / NovoLog®Mix | 7,821 | 6,499 | 5,637 | |||||||||||||||
| Levemir® | 6,880 | 5,223 | 3,850 | |||||||||||||||
| Total modern insulin | 26,601 | 21,471 | 17,317 | |||||||||||||||
| Human insulin | 11,827 | 11,315 | 11,804 | |||||||||||||||
| Victoza® | 2,317 | 87 | – | |||||||||||||||
| Protein-related products | 2,214 | 1,977 | 1,844 | |||||||||||||||
| Oral antidiabetic products (OAD) | 2,751 | 2,652 | 2,391 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
| Diabetes care total sales | 45,710 | 37,502 | 33,356 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
| NovoSeven® | 8,030 | 7,072 | 6,396 | |||||||||||||||
| Norditropin® | 4,803 | 4,401 | 3,865 | |||||||||||||||
| Hormone replacement therapy | 1,892 | 1,744 | 1,612 | |||||||||||||||
| Other products | 341 | 359 | 324 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Biopharmaceuticals total sales | 15,066 | 13,576 | 12,197 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total business segments – other key figures | ||||||||||||||||||
| Total sales | 45,710 | 37,502 | 33,356 | 15,066 | 13,576 | 12,197 | 60,776 | 51,078 | 45,553 | |||||||||
| Change in DKK (%) | 21.9% | 12.4% | 9.4% | 11.0% | 11.3% | 7.4% | 19.0% | 12.1% | 8.9% | |||||||||
| Change in local currencies (%) | 15.7% | 11.1% | 12.7% | 5.4% | 9.3% | 11.1% | 13.0% | 10.6% | 12.2% | |||||||||
| Cost of goods sold | 10,131 | 9,001 | 8,705 | 1,549 | 1,437 | 1,404 | 11,680 | 10,438 | 10,109 | |||||||||
| Sales and distribution costs | 14,815 | 12,877 | 10,497 | 3,380 | 2,543 | 2,369 | 18,195 | 15,420 | 12,866 | |||||||||
| Research and development costs | 6,744 | 5,257 | 4,791 | 2,858 | 2,607 | 3,065 | 9,602 | 7,864 | 7,856 | |||||||||
| Administrative expenses | 2,260 | 2,044 | 1,936 | 805 | 720 | 699 | 3,065 | 2,764 | 2,635 | |||||||||
| Licence fees and other operating income, net | 342 | 187 | 142 | 315 | 154 | 144 | 657 | 341 | 286 | |||||||||
| Operating profit | 12,102 | 8,510 | 7,569 | 6,789 | 6,423 | 4,804 | 18,891 | 14,933 | 12,373 | |||||||||
| Depreciation, amortisation and impairment losses included in the costs | 1,887 | 1,973 | 1,899 | 580 | 578 | 543 | 2,467 | 2,551 | 2,442 | |||||||||
| Assets allocated to business segments | 34,947 | 29,703 | 30,468 | 7,906 | 8,984 | 6,640 | 42,853 | 38,687 | 37,108 | |||||||||
| Assets not allocated to business segments 1) | 18,549 | 16,055 | 13,495 | |||||||||||||||
| Total assets | 61,402 | 54,742 | 50,603 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) The part of total assets that has not been allocated to either of the two business segments includes Cash at bank and in hand, Marketable securities, Derivative financial instruments and tax assets etc.
Novo Nordisk Annual Report 2010 67
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
2 Segment information (continued)
Geographical segments
The Group operates in four geographical regions:
| • | North America: the US and Canada |
| • | Europe: the EU, EFTA, Albania, Bosnia-Herzegovina, Croatia, Macedonia, Serbia, Montenegro and Kosovo |
| • | Japan & Korea: Japan and Korea |
| • | International Operations: all other countries, currently including China. |
Sales are attributed to geographical regions according to the location of the customer. Allocation of property, plant and equipment 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 the Group’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 our total sales. However, sales to the US represent more than 90% of sales in region North America.
Effective 1 January 2011, China will be reported as a separate geographical region. Currently, China is reported as a part of International Operations. The change does not impact the segment reporting in the Annual Report 2010.
Geographical segments
| DKK million |
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
Europe
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
| Sales | 23,609 | 18,279 | 15,154 | 18,664 | 17,540 | 17,219 | ||||||
| Change in DKK (%) | 29.2% | 20.6% | 10.2% | 6.4% | 1.9% | 5.3% | ||||||
| Change in local currencies (%) | 22.4% | 15.2% | 17.7% | 4.6% | 5.2% | 6.7% | ||||||
| Property, plant and equipment | 987 | 905 | 973 | 15,669 | 15,445 | 15,624 | ||||||
| Total assets | 3,680 | 3,232 | 3,532 | 46,654 | 42,933 | 40,849 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DKK million |
2010
|
2009
|
2008
|
2010
|
2009
|
2008
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| International Operations 2) | Japan & Korea 2) | |||||||||||
|
|
|
|
|
|
|
|||||||
| Sales | 12,843 | 10,371 | 8,984 | 5,660 | 4,888 | 4,196 | ||||||
| Change in DKK (%) | 23.8% | 15.4% | 14.5% | 15.8% | 16.5% | 7.9% | ||||||
| Change in local currencies (%) | 15.1% | 17.3% | 18.9% | 3.3% | 1.8% | 1.8% | ||||||
| Property, plant and equipment | 3,638 | 2,688 | 1,828 | 213 | 188 | 214 | ||||||
| Total assets | 9,910 | 7,574 | 5,292 | 1,158 | 1,003 | 930 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DKK
million
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Total | ||||||
|
|
|
|
|
|
|
|
| Sales | 60,776 | 51,078 | 45,553 | |||
| Change in DKK (%) | 19.0% | 12.1% | 8.9% | |||
| Change in local currencies (%) | 13.0% | 10.6% | 12.2% | |||
| Property, plant and equipment | 20,507 | 19,226 | 18,639 | |||
| Total assets | 61,402 | 54,742 | 50,603 | |||
|
|
|
|
|
|
|
2) As at 1 January 2010, Korea joined Japan to form Region Japan & Korea, while Australia and New Zealand became part of Region International Operations. The historical figures for 2009 and 2008 have been restated and are comparable to the 2010 regional set-up.
68 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
3 Gross-to-net sales reconciliation
| DKK million |
2010
|
2009
|
2008
|
||||
|
|
|
|
|
|
|
||
| Gross sales |
75,811
|
62,459
|
54,532
|
||||
|
|
|
|
|
|
|
||
| US Medicaid and Medicare rebates |
(4,124
|
) |
(2,447
|
) |
(1,672
|
) | |
| US managed healthcare rebates |
(2,494
|
) |
(2,121
|
) |
(1,543
|
) | |
| US wholesaler charge-backs |
(4,994
|
) |
(3,720
|
) |
(2,949
|
) | |
| Non-US healthcare plans and programme rebates |
(543
|
) |
(431
|
) |
(350
|
) | |
| Sales returns and discounts |
(2,880
|
) |
(2,662
|
) |
(2,465
|
) | |
|
|
|
|
|
|
|
||
| Total gross-to-net sales adjustments |
(15,035
|
) |
(11,381
|
) |
(8,979
|
) | |
|
|
|
|
|
|
|
||
| Total net sales |
60,776
|
51,078
|
45,553
|
||||
|
|
|
|
|
|
|
||
4 Employee cost
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Wages and salaries |
14,520
|
13,231
|
11,959
|
|||
| Share-based payment costs | ||||||
| (refer to note 28) |
463
|
259
|
331
|
|||
| Pensions – defined contribution plans |
1,052
|
958
|
871
|
|||
| Pensions – retirement benefit | ||||||
| obligations (refer to note 21) |
210
|
152
|
128
|
|||
| Other contributions to social security |
1,067
|
898
|
756
|
|||
| Other employee costs |
1,510
|
1,332
|
1,240
|
|||
|
|
|
|
|
|
|
|
| Total employee costs for the year |
18,822
|
16,830
|
15,285
|
|||
| Change in employee costs included | ||||||
| in assets under construction |
(559
|
) |
(485
|
) |
(449
|
) |
| Change in employee costs included | ||||||
| in inventories |
76
|
(21
|
) |
(146
|
) | |
|
|
|
|
|
|
|
|
| Total employee costs expensed | ||||||
| in the Income statement |
18,339
|
16,324
|
14,690
|
|||
|
|
|
|
|
|
|
|
| Included in the Income statement: | ||||||
| Cost of goods sold |
4,006
|
3,952
|
3,676
|
|||
| Sales and distribution costs |
7,240
|
6,063
|
5,083
|
|||
| Research and development costs |
3,697
|
3,218
|
3,040
|
|||
| Administrative expenses |
2,059
|
1,811
|
1,654
|
|||
| Licence fees and other operating income |
1,337
|
1,280
|
1,237
|
|||
|
|
|
|
|
|
|
|
| Total included in the Income statement |
18,339
|
16,324
|
14,690
|
|||
|
|
|
|
|
|
|
|
Employee costs related to NNE Pharmaplan and NNIT are included in the schedule of total employee costs, whereas in previous years they were stated outside the schedule. Comparatives for 2009 and 2008 have been included in the schedule accordingly.
| Average number of full-time equivalents |
29,423
|
27,985
|
26,069
|
|||
| Year-end number of full-time equivalents |
30,014
|
28,809
|
26,575
|
|||
|
|
|
|
|
|
|
|
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Remuneration to Executive Management amounts to: | ||||||
| Salary |
32
|
30
|
31
|
|||
| Pension |
8
|
8
|
7
|
|||
| Other benefits |
1
|
1
|
2
|
|||
|
|
|
|
|
|
|
|
| Total |
41
|
39
|
40
|
|||
|
|
|
|
|
|
|
Share-based payments are allocated in the joint pool with other members of the Senior Management Board. Please refer to the ‘Remuneration report’ in the section Corporate governance, remuneration and leadership, pp 46–49, for further information on remuneration to the Board of Directors and Executive Management.
5 Fee
to statutory auditors
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Statutory audit |
25
|
25
|
25
|
|||
| Audit-related services |
6
|
6
|
4
|
|||
| Tax advisory services |
15
|
13
|
16
|
|||
| Other services |
4
|
3
|
1
|
|||
|
|
|
|
|
|
|
|
| Total fee to statutory auditors |
50
|
47
|
46
|
|||
|
|
|
|
|
|
|
6 Depreciation, amortisation and impairment losses
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Included in the Income statement: | ||||||
| Cost of goods sold |
1,832
|
1,851
|
1,831
|
|||
| Sales and distribution costs |
60
|
43
|
38
|
|||
| Research and development costs |
460
|
528
|
473
|
|||
| Administrative expenses |
115
|
129
|
100
|
|||
|
|
|
|
|
|
|
|
| Total depreciation, amortisation and impairment losses |
2,467
|
2,551
|
2,442
|
|||
|
|
|
|
|
|
|
7 Financial income
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Interest income |
235
|
313
|
631
|
|||
| Foreign exchange gain (net) |
86
|
62
|
–
|
|||
| Foreign exchange gain on | ||||||
| derivatives (net) |
61
|
–
|
105
|
|||
| Gains on currency options (net) |
–
|
–
|
34
|
|||
| Foreign exchange gain on derivatives transferred from Other | ||||||
| comprehensive income (net) |
–
|
–
|
357
|
|||
|
|
|
|
|
|
|
|
| Total financial income |
382
|
375
|
1,127
|
|||
|
|
|
|
|
|
|
|
8 Financial expenses
|
DKK
million
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Interest expenses 1) | 500 | 384 | 246 | |||
| Foreign exchange loss (net) | – | – | 355 | |||
| Foreign exchange loss on | ||||||
| derivatives (net) | – | 95 | – | |||
| Loss on currency options (net) | 82 | 56 | – | |||
| Capital loss on investments etc | 23 | 16 | 28 | |||
| Other financial expenses | 46 | 52 | 52 | |||
| Foreign exchange loss on | ||||||
| derivatives transferred from Other | ||||||
| comprehensive income (net) | 1,406 | 662 | – | |||
|
|
|
|
|
|
|
|
| Total financial expenses | 2,057 | 1,265 | 681 | |||
|
|
|
|
|
|
|
1) Interest expenses include interest on tax cases ongoing or settled during the year.
Novo Nordisk Annual Report 2010 69
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
9 Taxes
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Current tax on profit for the year |
3,477
|
2,382 | 2,233 | |||
| Deferred tax on profit for the year (refer to note 20) |
495
|
840 | 851 | |||
|
|
|
|
|
|
|
|
| Tax on profit for the year |
3,972
|
3,222 | 3,084 | |||
| Adjustments related to previous years – current tax |
504
|
(54 | ) | (218 | ) | |
| Adjustments related to previous years – deferred tax |
(593
|
) | 52 | 184 | ||
|
|
|
|
|
|
|
|
| Income taxes in the Income statement |
3,883
|
3,220 | 3,050 | |||
|
|
|
|
|
|
|
|
| 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 to the Danish tax rate (net) |
(2.5%
|
) | (2.2% | ) | (0.3% | ) |
| Non-tax income less non-tax-deductible expenses (net) |
(1.2%
|
) | 0.2% | (0.4% | ) | |
| Other |
(0.1%
|
) | 0.0% | (0.3% | ) | |
|
|
|
|
|
|
|
|
| Effective tax rate |
21.2%
|
23.0% | 24.0% | |||
|
|
|
|
|
|
|
|
| Tax on Other comprehensive income for the year, (income)/expense (refer to note 20) |
(346
|
) | 25 | (81 | ) | |
|
|
|
|
|
|
|
Tax on Other comprehensive income for the year relates to tax on deferred (gains)/losses on cash flow hedges etc.
10 Earnings per share and dividend
| DKK million |
2010
|
2009
|
2008
|
|||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year | 14,403 | 10,768 | 9,645 | |||||
|
|
|
|
|
|
|
|
|
|
| Average number of shares outstanding | in 1,000 shares | 580,438 | 599,197 | 615,780 | ||||
| Dilutive effect of outstanding share bonus pool and options ‘in the money’ 1) | in 1,000 shares | 5,039 | 5,126 | 4,947 | ||||
|
|
|
|
|
|
|
|
|
|
| Average number of shares outstanding including dilutive effect of options ‘in the money’ | in 1,000 shares | 585,477 | 604,323 | 620,727 | ||||
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share 1) | DKK | 24.81 | 17.97 | 15.66 | ||||
| Diluted earnings per share 1) | DKK | 24.60 | 17.82 | 15.54 | ||||
|
|
|
|
|
|
|
|
|
1) For further information on outstanding share bonus pool and options, refer to notes 28 and 29.
Dividend
At the end of 2010, proposed dividends (not yet declared) of DKK 5,700 million
(DKK 10.00 per share) are included in Retained earnings.
The declared dividend included in Retained earnings was DKK 4,400 million (DKK 7.50 per share) and DKK 3,650 million (DKK 6.00 per share) in 2009 and 2008 respectively. No dividend is declared on treasury shares.
70 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
11 Intangible assets
| DKK million |
Goodwill
|
Patents
and
licences
etc
|
Other
intangible
assets
1)
|
Total
|
||||
|
|
|
|
|
|
|
|
|
|
| 2010 | ||||||||
| Cost at the beginning of the year | 139 | 928 | 727 | 1,794 | ||||
| Additions during the year | – | 148 | 339 | 487 | ||||
| Disposals during the year | (4 | ) | (2 | ) | (40 | ) | (46 | ) |
| Effect of currency translation | – | 16 | 26 | 42 | ||||
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 135 | 1,090 | 1,052 | 2,277 | ||||
|
|
|
|
|
|
|
|
|
|
| Amortisation and impairment losses at the beginning of the year | 65 | 283 | 409 | 757 | ||||
| Amortisation for the year | – | 31 | 49 | 80 | ||||
| Amortisation and impairment losses reversed on disposals during the year | – | (1 | ) | (40 | ) | (41 | ) | |
| Effect of currency translation | – | 7 | 16 | 23 | ||||
|
|
|
|
|
|
|
|
|
|
| Amortisation and impairment losses at the end of the year | 65 | 320 | 434 | 819 | ||||
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 70 | 770 | 618 | 1,458 | ||||
|
|
|
|
|
|
|
|
|
| 2009 | ||||||||
| Cost at the beginning of the year | 136 | 700 | 609 | 1,445 | ||||
| Additions during the year | 3 | 277 | 113 | 393 | ||||
| Disposals during the year | – | (49 | ) | (6 | ) | (55 | ) | |
| Effect of currency translation | – | – | 11 | 11 | ||||
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 139 | 928 | 727 | 1,794 | ||||
|
|
|
|
|
|
|
|
|
|
| Amortisation and impairment losses at the beginning of the year | 65 | 219 | 373 | 657 | ||||
| Amortisation for the year | – | 21 | 40 | 61 | ||||
| Impairment losses for the year | – | 92 | – | 92 | ||||
| Amortisation and impairment losses reversed on disposals during the year | – | (49 | ) | (6 | ) | (55 | ) | |
| Effect of currency translation | – | – | 2 | 2 | ||||
|
|
|
|
|
|
|
|
|
|
| Amortisation and impairment losses at the end of the year | 65 | 283 | 409 | 757 | ||||
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 74 | 645 | 318 | 1,037 | ||||
|
|
|
|
|
|
|
|
|
1) Includes primarily internally developed software and costs related to major IT projects.
Impairment tests in 2010 and 2009 were based upon Management’s projections and anticipated net present value of future cash flows from cash-generating units. Management has used a discount rate (WACC) pre tax of 9% 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, forecast life cycle and forecast cash flow over that period and the useful life of the underlying assets. No material impairment losses have been recognised during 2010 and 2009.
Novo Nordisk Annual Report 2010 71
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
12 Property, plant and equipment
| DKK million |
Land
and
buildings
|
Plant
and
machinery
|
Other
equipment
|
Payments
on
account
and
assets
in
course
of
construction
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2010 | ||||||||||
| Cost at the beginning of the year | 12,855 | 16,709 | 2,740 | 2,907 | 35,211 | |||||
| Additions during the year | 142 | 394 | 146 | 2,694 | 3,376 | |||||
| Disposals during the year | (35 | ) | (830 | ) | (156 | ) | – | (1,021 | ) | |
| Transfer from/(to) other items | 372 | 727 | 76 | (1,175 | ) | – | ||||
| Effect of currency translation | 264 | 243 | 55 | 90 | 652 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 13,598 | 17,243 | 2,861 | 4,516 | 38,218 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the beginning of the year | 4,387 | 9,913 | 1,685 | – | 15,985 | |||||
| Depreciation for the year | 581 | 1,453 | 285 | – | 2,319 | |||||
| Impairment losses for the year | 37 | 30 | 1 | – | 68 | |||||
| Depreciation and impairment losses reversed on disposals during the year | (29 | ) | (708 | ) | (145 | ) | – | (882 | ) | |
| Effect of currency translation | 72 | 118 | 31 | – | 221 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the end of the year | 5,048 | 10,806 | 1,857 | – | 17,711 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 8,550 | 6,437 | 1,004 | 4,516 | 20,507 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| 200909 | ||||||||||
| Cost at the beginning of the year | 12,280 | 15,699 | 2,620 | 1,789 | 32,388 | |||||
| Additions during the year | 232 | 259 | 179 | 1,962 | 2,632 | |||||
| Disposals during the year | (81 | ) | (129 | ) | (118 | ) | – | (328 | ) | |
| Transfer from/(to) other items | 190 | 615 | 54 | (859 | ) | – | ||||
| Effect of currency translation | 234 | 265 | 5 | 15 | 519 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 12,855 | 16,709 | 2,740 | 2,907 | 35,211 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the beginning of the year | 3,792 | 8,471 | 1,486 | – | 13,749 | |||||
| Depreciation for the year | 528 | 1,418 | 297 | – | 2,243 | |||||
| Impairment losses for the year | 100 | 52 | 3 | – | 155 | |||||
| Depreciation and impairment losses reversed on disposals during the year | (73 | ) | (105 | ) | (101 | ) | – | (279 | ) | |
| Effect of currency translation | 40 | 77 | – | – | 117 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the end of the year | 4,387 | 9,913 | 1,685 | – | 15,985 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 8,468 | 6,796 | 1,055 | 2,907 | 19,226 | |||||
|
|
|
|
|
|
|
|
|
|
|
13 Investments in associated companies
|
DKK
million
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Carrying amount at the beginning of the year | 176 | 222 | 500 | |||
| Investments during the year | 38 | 15 | – | |||
| Transfers to Other non-current financial assets | (68 | ) | – | – | ||
| Divestments during the year | (70 | ) | – | (18 | ) | |
| Share of profit/(loss) recognised in the Income statement | 38 | (55 | ) | (124 | ) | |
| Impairments | (63 | ) | – | – | ||
| Dividend received | (8 | ) | (18 | ) | (170 | ) |
| Other equity movements | – | 12 | 34 | |||
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 43 | 176 | 222 | |||
|
|
|
|
|
|
|
|
| Share of profit/(loss) | 38 | (55 | ) | (124 | ) | |
| Impairments | (63 | ) | – | – | ||
| Gain from divestment of shares in ZymoGenetics, Inc | 1,056 | – | – | |||
| Transfer of share of Other comprehensive income of ZymoGenetics, Inc | 36 | – | – | |||
| Currency translation | 3 | – | – | |||
|
|
|
|
|
|
|
|
| Total share of profit/(loss) of associated companies, net of tax | 1,070 | (55 | ) | (124 | ) | |
|
|
|
|
|
|
|
In 2010, Novo Nordisk sold its 22,143,320 shares in ZymoGenetics, Inc. at a price of USD 9.75 per share. The sale resulted in a non-recurring income of DKK 1,092 million. The income from the transaction is exempt from tax charges under applicable Danish tax laws. Also during 2010, Novo Nordisk transferred Innate Pharma SA to Other non-current financial assets as Novo Nordisk no longer holds significant influence. Carrying amount of investments at the end of the year of DKK 43 million relates to Harno Invest A/S (formerly Dako A/S) only. Public accounting information for 2010 are not yet available. In 2009, the associated companies realised DKK 170 million in sales and generated a net loss of DKK 598 million. At 31 December 2009, total assets amounted to DKK 2,168 million, whereas total liabilities amounted to DKK 1,772 million.
72 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
14 Financial assets and liabilities
| DKK million |
Equity
investments |
Maturity
< 1 year |
|
Maturity
> 1 year < 5 years |
Maturity
> 5 years |
Total
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
| Assets at the end of the year | ||||||||||
| 2010 | ||||||||||
| Available-for-sale financial assets | ||||||||||
| – Other non-current financial assets (equity investments) |
216
|
216 | ||||||||
| – Marketable securities (bonds) 1) |
3,174
|
752
|
3,926 | |||||||
| Financial assets measured at fair value through the Income statement | ||||||||||
| – Derivative financial instruments (refer to note 30) |
108
|
108 | ||||||||
| Loans and receivables | ||||||||||
| – Other non-current financial assets |
38
|
38 | ||||||||
| – Trade receivables (refer to note 16) |
8,500
|
8,500 | ||||||||
| – Other current assets less prepayments (refer to note 17) |
1,786
|
1,786 | ||||||||
| – Cash at bank and in hand |
12,017
|
12,017 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
216
|
25,585
|
752
|
38
|
26,591 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2009 | ||||||||||
| Available-for-sale financial assets | ||||||||||
| – Other non-current financial assets (equity investments) |
145
|
145 | ||||||||
| – Marketable securities (bonds) 1) |
500
|
513
|
1,013 | |||||||
| Financial assets measured at fair value through the Income statement | ||||||||||
| – Derivative financial instruments (refer to note 30) |
44
|
55
|
99 | |||||||
| Financial assets measured at fair value through Other comprehensive income | ||||||||||
| – Derivative financial instruments (refer to note 30) |
506
|
(88)
|
418 | |||||||
| Loans and receivables | ||||||||||
| – Other non-current financial assets |
37
|
37 | ||||||||
| – Trade receivables (refer to note 16) |
7,063
|
7,063 | ||||||||
| – Other current assets less prepayments (refer to note 17) |
1,271
|
1,271 | ||||||||
| – Cash at bank and in hand |
11,296
|
11,296 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
145
|
20,680
|
480
|
37
|
21,342 | |||||
|
|
|
|
|
|
|
|
|
|
|
1) Danish AAA-rated mortgage bonds issued by Danish credit institutions governed by the Danish Financial Supervisory Authority. Redemption yield on the bond portfolio is 1.05% (1.79% in 2009). Nominal EUR 9 million (DKK 69 million) of Greek zero-coupon state bonds related to the settlement in 2010 of overdue hospital accounts receivables is included.
|
Maturity
|
Maturity
|
Maturity
|
Total
|
|||||
|
<
1 year
|
>
1 year
|
>
5 years
|
||||||
| DKK million |
|
<
5 years
|
||||||
|
|
|
|
|
|
|
|
|
|
| Liabilities at the end of the year | ||||||||
| 2010 | ||||||||
| Financial liabilities measured at amortised cost | ||||||||
| – Non-current debt (refer to note 19) | 145 |
359
|
504 | |||||
| – Current debt (refer to note 23) | 562 | 562 | ||||||
| – Trade payables | 2,906 | 2,906 | ||||||
| – Other current liabilities less taxes and duties payable (refer to note 24) | 7,636 | 7,636 | ||||||
| Financial liabilities measured at fair value through the Income statement | ||||||||
| – Derivative financial instruments (refer to note 30) | 438 | 8 | 446 | |||||
| Financial liabilities measured at fair value through Other comprehensive income | ||||||||
| – Derivative financial instruments (refer to note 30) | 582 | 130 | 712 | |||||
|
|
|
|
|
|
|
|
|
|
| Total | 12,124 | 283 |
359
|
12,766 | ||||
|
|
|
|
|
|
|
|
|
|
| 2009 | ||||||||
| Financial liabilities measured at amortised cost | ||||||||
| – Non-current debt (refer to note 19) | 563 |
407
|
970 | |||||
| – Current debt (refer to note 23) | 263 | 263 | ||||||
| – Trade payables | 2,242 | 2,242 | ||||||
| – Other current liabilities less taxes and duties payable (refer to note 24) | 6,551 | 6,551 | ||||||
| Financial liabilities measured at fair value through the Income statement | ||||||||
| – Derivative financial instruments (refer to note 30) | 56 | 66 | 122 | |||||
| Financial liabilities measured at fair value through Other comprehensive income | ||||||||
| – Derivative financial instruments (refer to note 30) | 15 | 18 | 33 | |||||
|
|
|
|
|
|
|
|
|
|
| Total | 9,127 | 647 |
407
|
10,181 | ||||
|
|
|
|
|
|
|
|
|
|
For a description of the credit quality of financial assets such as Trade receivables, Cash at bank and in hand and Current debt and Derivative financial instruments, refer to notes 27 and 30.
Novo Nordisk Annual Report 2010 73
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
14 Financial assets and liabilities (continued)
Financial assets and liabilities that are measured in the Balance sheet at fair value can be categorised by the following fair value measurement hierarchy:
| DKK million |
Active
market
data
1)
|
Directly
or
indirectly
observable
market
data
2)
|
Not
based on
observable
market
data
3)
|
Total
|
||||
|
|
|
|
|
|
|
|
|
|
| 2010 | ||||||||
| Available-for-sale financial assets | ||||||||
| Other non-current financial assets (equity investments) | 57 | 159 | 216 | |||||
| Marketable securities (bonds) | 3,926 | 3,926 | ||||||
| Financial assets at fair value through the Income statement | ||||||||
| Derivative financial instruments | 108 | 108 | ||||||
|
|
|
|
|
|
|
|
|
|
| Total assets | 3,983 | 108 | 159 | 4,250 | ||||
|
|
|
|
|
|
|
|
|
|
| Financial liabilities at fair value through the Income statement | ||||||||
| Derivative financial instruments | 1,158 | 1,158 | ||||||
|
|
|
|
|
|
|
|
|
|
| Total liabilities | – | 1,158 | – | 1,158 | ||||
|
|
|
|
|
|
|
|
|
|
| 2009 | ||||||||
| Available-for-sale financial assets | ||||||||
| Other non-current financial assets (equity investments) | 8 | 137 | 145 | |||||
| Marketable securities (bonds) | 1,013 | 1,013 | ||||||
| Financial assets at fair value through the Income statement | ||||||||
| Derivative financial instruments | 517 | 517 | ||||||
|
|
|
|
|
|
|
|
|
|
| Total assets | 1,021 | 517 | 137 | 1,675 | ||||
|
|
|
|
|
|
|
|
|
|
| Financial liabilities at fair value through the Income statement | ||||||||
| Derivative financial instruments | 155 | 155 | ||||||
|
|
|
|
|
|
|
|
|
|
| Total liabilities | – | 155 | – | 155 | ||||
|
|
|
|
|
|
|
|
|
1) The
fair value of financial instruments traded in active markets is based on quoted
market prices at the balance sheet date. The quoted market price used for financial
assets held by the Group is the current bid price.
2) The
fair value of financial instruments that are not traded in an active market
(ie over-the-counter derivatives) is determined using valuation techniques.
3) If
there are no observable market data available (ie unlisted equity investments),
the instrument is included in the latter category.
The following table presents the changes in the category ‘Not based on observable market data’ for the year ended 31 December 4).
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Other non-current financial assets (equity investments) | ||||
| Balance at the beginning of the year | 137 | 153 | ||
| Total gains/(losses) recognised in the Income statement, financial income/expenses | (12 | ) | (33 | ) |
| Purchases | 34 | 17 | ||
|
|
|
|
|
|
| Balance at the end of the year | 159 | 137 | ||
|
|
|
|
|
4) There were no transfers between the categories ‘Active market data’ and ‘Directly or indirectly observable market data’ during 2010 or 2009.
74 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
15 Inventories
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Raw materials | 1,378 | 1,290 | ||
| Work in progress | 6,344 | 7,254 | ||
| Finished goods | 3,268 | 2,196 | ||
|
|
|
|
|
|
| Total inventories (gross) | 10,990 | 10,740 | ||
| Inventory write-downs at year-end | 1,301 | 724 | ||
|
|
|
|
|
|
| Total inventories | 9,689 | 10,016 | ||
|
|
|
|
|
|
| Indirect production costs included in work | ||||
| in progress and finished goods | 5,090 | 5,046 | ||
|
|
|
|
|
|
| The movements in the inventory write-downs | ||||
| can be specified as follows: | ||||
| Inventory write-downs at the beginning of the year | 724 | 1,038 | ||
| Utilisation of inventory write-downs | (139 | ) | (513 | ) |
| Reversal of inventory write-downs | (116 | ) | (115 | ) |
| Inventory write-downs net for the year | 832 | 314 | ||
|
|
|
|
|
|
| Inventory write-downs at the end of the year | 1,301 | 724 | ||
|
|
|
|
|
16 Trade receivables
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Trade receivables (gross) |
9,127
|
7,663
|
||
| Allowances at the end of the year |
627
|
600
|
||
|
|
|
|
|
|
|
Trade
receivables (net)
|
8,500
|
7,063
|
||
|
|
|
|
|
|
| Trade receivables (net) are equal to an average | ||||
| credit period of 51 days (50 days in 2009). | ||||
| Trade receivables can be specified as follows: | ||||
| Non-impaired trade receivables | ||||
| – Not yet due | 7,425 | 5,801 | ||
| – Overdue by between 1 and 179 days | 727 | 678 | ||
| – Overdue by between 180 and 359 days | 128 | 452 | ||
| – Overdue by more than 360 days | 220 | 132 | ||
|
|
|
|
|
|
| Total exposure to credit risk | 8,500 | 7,063 | ||
| Trade receivables allowances | 627 | 600 | ||
|
|
|
|
|
|
| Trade receivables (gross) | 9,127 | 7,663 | ||
|
|
|
|
|
|
| Allowances for doubtful receivables can be | ||||
| specified as follows: | ||||
| Carrying amount at the beginning of the year | 600 | 602 | ||
| Confirmed losses | (14 | ) | (20 | ) |
| Reversal of allowances for possible losses | (141 | ) | (32 | ) |
| Allowances for possible losses for the year | 164 | 74 | ||
| Effect of currency translation | 18 | (24 | ) | |
|
|
|
|
|
|
| Carrying amount at the end of the year | 627 | 600 | ||
|
|
|
|
|
17 Other current assets
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Prepayments 1) | 617 | 691 | ||
| Interest receivable | 97 | 83 | ||
| Amounts owed by affiliated companies | 111 | 118 | ||
| Rent deposit | 455 | 344 | ||
| VAT receivable | 474 | 125 | ||
| Other receivables 2) | 649 | 601 | ||
|
|
|
|
|
|
| Total other current assets | 2,403 | 1,962 | ||
|
|
|
|
|
1) Comprises
prepayments to ongoing research and development activities and payments made
concerning subsequent financial years etc.
2) Other
receivables comprise miscellaneous duties and work in progress for third parties
etc.
Novo Nordisk Annual Report 2010 75
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
18 Share capital
| DKK million |
A
share
capital |
|
B
share
capital |
|
Total
share
capital |
||
|
|
|
|
|
|
|
|
|
| Development in share capital: | |||||||
| 2006 and before |
107
|
567
|
674
|
||||
| 2007 |
–
|
(27
|
)
|
(27
|
) | ||
| 2008 |
–
|
(13
|
)
|
(13
|
) | ||
| 2009 |
–
|
(14
|
)
|
(14
|
) | ||
|
|
|
|
|
|
|
|
|
| At the beginning of the year |
107
|
513
|
620
|
||||
| 2010 |
–
|
(20
|
)
|
(20
|
) | ||
|
|
|
|
|
|
|
|
|
| At the end of the year |
107
|
493
|
600
|
||||
|
|
|
|
|
|
|
|
At the end of 2010, the share capital amounted to DKK 107,487,200 in A share capital (equal to 107,487,200 A shares of DKK 1) and DKK 492,512,800 in B share capital (equal to 492,512,800 B shares of DKK 1).
| Treasury shares |
Market
value
DKK
million
|
As
% of share
capital before cancellation |
As
% of share
capital after cancellation |
2010
Number
of
B Shares of DKK 1 |
2009
Number
of
B Shares of DKK 1 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Holding at the beginning of the year | 10,670 |
5.18%
|
32,137,945 | 25,721,095 | ||||||
| Cancellation of treasury shares | (6,640 | ) |
(3.23%
|
) | (20,000,000 | ) | (14,000,000 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| Holding of treasury shares, adjusted for cancellation | 4,030 |
1.95%
|
2.02%
|
12,137,945 | 11,721,095 | |||||
| Purchase during the year | 9,498 |
3.26%
|
19,534,528 | 21,661,949 | ||||||
| Sale during the year | (678 | ) |
(0.58%
|
) | (3,465,718 | ) | (1,245,099 | ) | ||
| Value adjustment | 4,892 | – | – | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Holding at the end of the year | 17,742 |
4.70%
|
28,206,755 | 32,137,945 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of treasury shares during the year relates to the DKK 9.5 billion share repurchase programmes for 2010 of Novo Nordisk B shares. The purpose of the programme was a reduction of the company’s share capital. Sale of treasury shares relates to exercised share options, employee share savings programme and employee shares.
At the end of the year, 6,255,365 shares of the treasury B shareholding are regarded as hedges for the share-based incentive schemes and restricted stock awards to employees.
19 Non-current debt
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Mortgage debt and other secured loans 1) | 504 | 503 | ||
| Unsecured loans and other non-current loans | – | 467 | ||
|
|
|
|
|
|
| Total non-current debt | 504 | 970 | ||
|
|
|
|
|
|
| The debt is denominated in the following currencies: | ||||
| DKK | 2 | 2 | ||
| EUR | 502 | 501 | ||
| USD | – | 467 | ||
|
|
|
|
|
|
| Total non-current debt | 504 | 970 | ||
|
|
|
|
|
Adjustment
of the above loans to market value at year-end 2010 would result in a loss of
DKK 4 million (a loss of DKK 22 million at year-end 2009).
1) Terms
to maturity between 2016 and 2022 and a weighted average interest rate of 1.34%.
76 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
20 Deferred income tax assets and liabilities
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| At the beginning of the year | (1,555 | ) | (708 | ) |
| Deferred tax on profit for the year (refer to note 9) | (495 | ) | (840 | ) |
| Adjustment relating to previous years | 593 | (52 | ) | |
| Deferred tax on items recognised in Other comprehensive income (refer to note 9) | 346 | (14 | ) | |
| Effect of currency translation | 93 | 59 | ||
|
|
|
|
|
|
| Total deferred tax assets/(liabilities), net | (1,018 | ) | (1,555 | ) |
|
|
|
|
|
|
2010
|
2009
|
|||||||||||
| DKK million |
Assets
|
Liabilities
|
Total
|
Assets
|
Liabilities
|
Total | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Specification | ||||||||||||
| The deferred tax assets and liabilities are allocated | ||||||||||||
| to the various items in the Balance sheet as follows: | ||||||||||||
| Property, plant and equipment | 189 | (1,468 | ) | (1,279 | ) | 165 | (1,432 | ) | (1,267 | ) | ||
| Intangible assets | 549 | (4 | ) | 545 | 475 | (5 | ) | 470 | ||||
| Indirect production costs | – | (1,272 | ) | (1,272 | ) | – | (1,262 | ) | (1,262 | ) | ||
| Unrealised profit on intra-Group sales | 2,703 | – | 2,703 | 2,106 | – | 2,106 | ||||||
| Provisions for doubtful trade receivables | 49 | – | 49 | 101 | – | 101 | ||||||
| Tax-loss carry-forward | 113 | – | 113 | 44 | – | 44 | ||||||
| Other | 478 | (2,355 | ) | (1,877 | ) | 288 | (2,035 | ) | (1,747 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,081 | (5,099 | ) | (1,018 | ) | 3,179 | (4,734 | ) | (1,555 | ) | |||
| Netting of deferred tax assets and deferred tax liabilities related to | ||||||||||||
| income taxes for which there is a legally enforceable right to offset | (2,234 | ) | 2,234 | 0 | (1,724 | ) | 1,724 | 0 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total deferred tax assets/(liabilities), net | 1,847 | (2,865 | ) | (1,018 | ) | 1,455 | (3,010 | ) | (1,555 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax losses carried forward
Further to the above, the tax value of tax losses carried forward of DKK 176 million (DKK 285 million in 2009) has not been recognised in the Balance sheet due to the likelihood that the tax losses will not be realised in the future.
21 Retirement benefit obligations
Most employees in the Group are covered by post-employment retirement plans primarily in the form of defined contribution plans but in a few cases in the form of defined benefit plans. Group companies sponsor these plans either directly or by contributing to independently administered funds. The nature of such plans varies according to the legal regulations, fiscal requirements and economic conditions of the countries in which the employees are employed, and the benefits are generally based on the employees’ remuneration and years of service. The obligations relate both to existing retirees’ pensions and to pension entitlements of future retirees.
The Group’s defined benefit plans are primarily located in Japan, Germany, the United States and Switzerland. Post-employment benefit plans are usually funded by payments from Group companies and by employees to funds independent of the Group. Where a plan is unfunded, a liability for the retirement obligation is recognised in the Balance sheet. In accordance with the Accounting policies, the costs recognised for post-employment benefits are included in Cost of goods sold, Sales and distribution costs, Research and development costs and Administrative expenses.
Other post-employment benefits consist mostly of post-retirement healthcare plans, principally in the United States. The following shows a five-year summary reflecting the funding of retirement obligations and the impact of historical deviations between expected and actual return on plan assets and actuarial adjustments on plan liabilities:
|
DKK
million
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Retirement benefit obligations |
1,452
|
1,063
|
1,103
|
885
|
938
|
|||||
| Fair value of plan assets |
(766
|
)
|
(620
|
) |
(649
|
) |
(566
|
) |
(495
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
| (Over)/under funding |
686
|
443
|
454
|
319
|
443
|
|||||
| Unrecognised actuarial gains/(losses) 1) |
(117
|
)
|
13 | (35 | ) | 43 |
(113
|
) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| Net retirement benefit obligations recognised in the Balance sheet |
569
|
456 | 419 | 362 |
330
|
|||||
|
|
|
|
|
|
|
|
|
|
|
1) Actuarial (gains)/losses on plan assets and plan liabilities for the year are predominantly related to actuarial adjustments while experience adjustments are immaterial.
Novo Nordisk Annual Report 2010 77
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
21 Retirement benefit obligations (continued)
|
DKK
million
|
2010
|
2009
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Pension
plans
|
Medical
benefits
|
Total
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
| Changes in the retirement | ||||||||
| benefit obligations | ||||||||
| At the beginning of the year | 832 | 231 | 1,063 | 1,103 | ||||
| Current service costs | 99 | 38 | 137 | 118 | ||||
| Interest cost | 35 | 15 | 50 | 45 | ||||
| Actuarial (gains)/losses | 92 | 15 | 107 | (29 | ) | |||
| Past service costs | (1 | ) | (1 | ) | (4 | ) | ||
| Benefits paid | (29 | ) | (3 | ) | (32 | ) | (53 | ) |
| Curtailments | – | (2 | ) | |||||
| Settlements | – | (104 | ) | |||||
| Effect of currency translation | 96 | 19 | 115 | (3 | ) | |||
| Other | 14 | (1 | ) | 13 | (8 | ) | ||
|
|
|
|
|
|
|
|
|
|
| At the end of the year | 1,138 | 314 | 1,452 | 1,063 | ||||
|
|
|
|
|
|
|
|
|
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Changes in the fair value of plan assets | ||||
| At the beginning of the year | 620 | 649 | ||
| Expected return on plan assets | 26 | 20 | ||
| Actuarial gains/(losses) | (13 | ) | (14 | ) |
| Employer contributions | 84 | 68 | ||
| Benefits paid to employees | (19 | ) | (40 | ) |
| Curtailments | – | 3 | ||
| Settlements | – | (67 | ) | |
| Effect of currency translation | 62 | 1 | ||
| Other | 6 | – | ||
|
|
|
|
|
|
| At the end of the year | 766 | 620 | ||
|
|
|
|
|
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Net retirement benefit obligations | ||||
| recognised in the Balance sheet | ||||
| Present value of funded retirement | ||||
| benefit obligations | 1,070 | 832 | ||
| Fair value of plan assets | (766 | ) | (620 | ) |
|
|
|
|
|
|
| Net retirement benefit obligations funded | 304 | 212 | ||
| Present value of unfunded retirement | ||||
| benefit obligations | 382 | 231 | ||
|
|
|
|
|
|
| (Over)/underfunding | 686 | 443 | ||
| Unrecognised actuarial gains/(losses) | ||||
| on pension plans (net) | (144 | ) | (26 | ) |
| Unrecognised actuarial gains/(losses) | ||||
| on post-employment medical benefits (net) | 24 | 37 | ||
| Unrecognised past service costs | 3 | 2 | ||
|
|
|
|
|
|
| Net retirement benefit obligation | 569 | 456 | ||
|
|
|
|
|
Amount recognised in the Balance sheet is reported as Non-current debt.
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Changes in net retirement benefit obligations | ||||
| At the beginning of the year | 456 | 419 | ||
| Recognised in the Income statement | 210 | 152 | ||
| Employer contributions | (84 | ) | (68 | ) |
|
|
|
|
|
|
| Benefit paid to employees (net) | (13 | ) | (13 | ) |
| Settlements | – | (37 | ) | |
| Curtailments | – | 7 | ||
| Currency translation | – | (4 | ) | |
|
|
|
|
|
|
| At the end of the year | 569 | 456 | ||
|
|
|
|
|
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Costs recognised in the Income statement | ||||
| for the year | ||||
| Current service costs | 137 | 118 | ||
| Interest cost on pension obligation | 50 | 45 | ||
| Expected return on plan assets 1) | (26 | ) | (20 | ) |
| Actuarial (gains)/losses | (11 | ) | 30 | |
| Curtailment/settlement gains | – | (20 | ) | |
| Past service costs | – | (1 | ) | |
| Effect of currency translation | 53 | – | ||
| Other | 7 | – | ||
|
|
|
|
|
|
| Total charge to the Income statement | 210 | 152 | ||
|
|
|
|
|
|
| 1) Actual return on plan assets was DKK 13 million in 2010 (a loss of DKK 6 million in 2009) | ||||
| The costs are recognised in the Income statement | ||||
| as employee costs by function and consist of: | ||||
| Defined benefit pension plans | 137 | 107 | ||
| Post-employment medical benefits | 73 | 45 | ||
|
|
|
|
|
|
| Total charge to the Income statement | 210 | 152 | ||
|
|
|
|
|
The Group expects to contribute DKK 73 million to its defined benefit plans in 2011 (actual DKK 84 million in 2010)
|
2010
|
2009
|
|||||||
|
|
|
|
|
|
|
|
|
|
| DKK | DKK | |||||||
| million | % | million | % | |||||
|
|
|
|
|
|
|
|
|
|
| Weighted average asset | ||||||||
| allocation of funded | ||||||||
| retirement obligations | ||||||||
| Coverage insurance 2) | 522 | 68% | 434 | 70% | ||||
| Equities | 83 | 11% | 57 | 9% | ||||
| Bonds | 88 | 12% | 68 | 11% | ||||
| Cash at bank | 63 | 8% | 59 | 10% | ||||
| Property | 10 | 1% | 2 | 0% | ||||
|
|
|
|
|
|
|
|
|
|
| Total | 766 | 100% | 620 | 100% | ||||
|
|
|
|
|
|
|
|
|
2) Novo Nordisk’s defined benefit payments in Germany and Switzerland are reimbursed by Allianz regardless of the value of the plan assets. The only risk related to the pension in these countries is therefore counterparty risk against Allianz.
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| The assumptions used for valuation of | ||||
| defined benefit plans and post-employment | ||||
| medical benefits are as follows | ||||
| Discount rate | 4% | 4% | ||
| Projected return on plan assets | 3% | 3% | ||
| Projected future remuneration increases | 2% | 3% | ||
| Healthcare cost trend rate | 5% | 6% | ||
| Inflation rate | 2% | 2% | ||
|
|
|
|
|
Actuarial valuations are performed annually for all major defined benefit plans. The overall expected rate of return is determined based on low-risk investments in bonds in the relevant currencies.
The effect of a 1 percentage point increase or decrease in the medical cost trend rate is shown below. The Group’s major post-employment medical plans are for US employees.
|
DKK
million
|
2010
|
2009
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Increase
|
Decrease
|
Increase
|
Decrease
|
|||||
|
|
|
|
|
|
|
|
|
|
| Current service and | ||||||||
| interest cost | 3 | (4 | ) | 2 | (3 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Defined benefit obligation | 20 | (22 | ) | 13 | (14 | ) | ||
|
|
|
|
|
|
|
|
|
78 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
22 Provisions for other liabilities
| DKK million |
Provisions
for
product
returns
1)
|
Provisions
for
sales
rebates
|
Other
provisions
2)
|
2010
Total
|
2009
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| At the beginning of the year |
588
|
2,623
|
1,187
|
4,398
|
3,786
|
|||||
| Additional provisions, including increases to existing provisions |
186
|
7,197
|
738
|
8,121
|
5,501
|
|||||
| Amount used during the year |
(241
|
) |
(5,491
|
) |
(182
|
) |
(5,914
|
) |
(4,738
|
) |
| Adjustments, including unused amounts reversed during the year |
(32
|
) |
(179
|
) |
(10
|
) |
(221
|
) |
(147
|
) |
| Effect of currency translation |
33
|
214
|
36
|
283
|
(4
|
) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| At the end of the year |
534
|
4,364
|
1,769
|
6,667
|
4,398
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Specification of other provisions: | ||||||||||
| Non-current |
319
|
–
|
1,704
|
2,023
|
1,157
|
|||||
| Current |
215
|
4,364
|
65
|
4,644
|
3,241
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total provisions for other liabilities |
534
|
4,364
|
1,769
|
6,667
|
4,398
|
|||||
|
|
|
|
|
|
|
|
|
|
|
1) Novo
Nordisk issues credit notes for expired goods as a part of normal business.
Consequently, a provision for future returns is made based on historical statistical
product returns, which represents Management’s best estimate.
2)
Other provisions consist of various types of provisions, including employee
benefits like jubilee benefits and provisions for legal disputes, which represent
Management’s best estimate. Please refer to note 31 for further information
on commitments and contingencies.
23 Current debt and derivative financial instruments
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Bank overdrafts | 57 | 262 | ||
| Loans | 505 | – | ||
| Derivative financial instruments | 1,158 | 156 | ||
|
|
|
|
|
|
| Total current debt and derivative | ||||
| financial instruments | 1,720 | 418 | ||
|
|
|
|
|
24 Other current liabilities
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Employee costs payable |
3,042
|
2,742
|
||
| Taxes and duties payable |
318
|
262
|
||
| Other payables 1) | 4,594 | 3,809 | ||
|
|
|
|
|
|
| Total other current liabilities | 7,954 | 6,813 | ||
|
|
|
|
|
1) Other payables primarily consist of accruals related to ongoing research and development clinical trials, royalty payments, deferred income and interest accruals etc.
25 Other adjustments for non-cash items
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Share-based payment costs | ||||||
| (refer to note 28) | 463 | 259 | 331 | |||
| Increase/(decrease) in provisions and benefit obligations | 2,382 | 649 | 221 | |||
| (Gains)/losses from sale of property, plant and equipment | 71 | (3 | ) | 95 | ||
| Change in allowances for doubtful trade receivables (refer to note 16) | 41 | 18 | 69 | |||
| Unrealised (gain)/loss on equity investments and bonds etc | (43 | ) | 21 | 30 | ||
| Unrealised foreign exchange (gain)/loss | (467 | ) | (253 | ) | 24 | |
| Share of (profit)/loss in associated companies (refer to note 13) | (1,070 | ) | 55 | 124 | ||
| Other, including difference between average exchange rate and year-end exchange rate | 457 | 113 | (280 | ) | ||
|
|
|
|
|
|
|
|
| Other adjustments for non-cash items | 1,834 | 859 | 614 | |||
|
|
|
|
|
|
|
26 Cash and cash equivalents
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Cash at bank and in hand | 12,017 | 11,296 | 8,781 | |||
| Bank overdrafts (refer to note 23) | (57 | ) | (262 | ) | (55 | ) |
|
|
|
|
|
|
|
|
| Cash and cash equivalents at the end of the year | 11,960 | 11,034 | 8,726 | |||
|
|
|
|
|
|
|
Novo Nordisk Annual Report 2010 79
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
27 Financial risk
Novo Nordisk has centralised the 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 allowed 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 and Other comprehensive
income, the Balance sheet and the Statement of cash flows.
The bulk of Novo Nordisk’s sales are in EUR, USD, JPY, CNY and GBP, while most production, research and development costs are carried in DKK. 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 Danish fixed-rate policy towards EUR.
The overall objective of foreign exchange risk management is to limit any short-term negative impact on earnings and cash flow from exchange rate fluctuations, thereby increasing the predictability of the financial results.
Novo Nordisk hedges existing assets and liabilities in major currencies as well as future expected cash flows up to 24 months forward. Currency hedging is based upon expectations of future exchange rates and takes place using mainly 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.
In 2010, the USD, the JPY, the CNY and the GBP appreciated by 8.1%, 22.6%, 11.8% and 5.3% versus the DKK respectively. In 2009, the USD, the JPY and the CNY depreciated by 1.8%, 3.9% and 1.7% versus the DKK respectively, whereas the GBP appreciated by 7.6% versus the DKK.
Key currencies:
| Exchange
rate DKK per 100 |
2010 average |
2009 average |
2010 end of year |
2009 end of year |
||||
|
|
|
|
|
|
|
|
|
|
| USD | 562 | 536 | 561 | 519 | ||||
| JPY | 6.42 | 5.73 | 6.89 | 5.62 | ||||
| CNY | 83 | 78 | 85 | 76 | ||||
| GBP | 869 | 836 | 867 | 823 | ||||
|
|
|
|
|
|
|
|
|
At year-end 2010, Novo Nordisk covered the foreign exchange exposures on the Balance sheet together with 15 months of expected future cash flow in USD. For JPY, CNY and GBP, the equivalent cover was 14 months, 12 months and 10 months respectively. At the end of 2009, the USD and CNY cover was 17 months, and for JPY and GBP the cover was 15 months and 14 months respectively.
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:
| DKK million | Estimated
for 2011 |
2010
|
||
|
|
|
|
|
|
| USD | 620 | 580 | ||
| JPY | 155 | 150 | ||
| CNY | 120 | 100 | ||
| GBP | 85 | 80 | ||
|
|
|
|
|
The table below shows the effect on the financial instruments if all other currencies increased by 5% and decreased by 5% respectively versus EUR and DKK at the end of 2010 and at the end of 2009.
|
5%
increase in all
|
5%
decrease in all
|
|||
|
currencies
against
|
currencies
against
|
|||
| DKK million | DKK and EUR | DKK and EUR | ||
|
|
|
|
|
|
| 2010 | ||||
| Other comprehensive income | (862 | ) | 893 | |
| Income statement | 93 | (38 | ) | |
|
|
|
|
|
|
| Total | (769 | ) | 855 | |
|
|
|
|
|
|
| 2009 | ||||
| Other comprehensive income | (878 | ) | 879 | |
| Income statement | (49 | ) | 98 | |
|
|
|
|
|
|
| Total | (927 | ) | 977 | |
|
|
|
|
|
The lower foreign exchange sensitivities in 2010, compared to 2009, are primarily a result of lower hedging covers as described in the above.
The financial instruments included in the foreign exchange sensitivity analysis are the Group’s:
| • | Cash, |
| • | Accounts receivable and Accounts payable, |
| • | 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 fixed assets.
Novo Nordisk only hedges invested equity in major foreign affiliates to a very limited extent. Equity hedging takes place using long-term cross-currency swaps. At the end of 2010, hedged equity constituted 15% of the Group’s JPY equity. At the end of 2009, 16% of the Group’s JPY equity was hedged.
Interest
rate risk
In
general, DKK and EUR interest rates declined in 2010. The Danish two-year
interest rate was 1.8% at the end of 2010, down from 2.42% at the end of 2009.
The three-month Cibor interest rate was 1.21% at the end of 2010, down from
1.55% in 2009.
Changes in interest rates affect Novo Nordisk’s financial instruments. At the end of 2010, an increase in the interest rate level of 1 percentage point would, all else being equal, decrease the fair value of Novo Nordisk’s finan-cial instruments by DKK 8 million (increase the fair value by DKK 19 million in 2009).
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 manage ment is
deposited with the Parent company, which invests surplus cash in money market
deposits and marketable securities.
Counterparty
risk
The
use of derivatives and money market deposits gives rise to counterparty exposure.
To manage counterparty credit risk, 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. Currently, all of Novo Nordisk’s significant financial
counterparties have a long-term credit rating in the AA or the A category.
Furthermore, maximum credit lines defined for each counter-party limit the
overall counterparty risk.
The credit risk on bonds is limited as investments are made in highly liquid bonds with solid credit ratings.
80 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
27 Financial
risk (continued)
Credit risk on Trade receivables and Other current assets is limited as Novo Nordisk has no significant concentration of credit risk, with exposure being spread over a large number of counterparties and customers.
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 pharma ceutical
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 60.2% at the end of the year (65.3% at the end of 2009).
28 Share-based payment schemes
|
DKK
million
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Employee shares |
241
|
49
|
171
|
|||
| Long-term share-based incentive programme (Senior Management Board) |
64
|
54
|
55
|
|||
| Long-term share-based incentive programme and share options (management group below | ||||||
| Senior Management Board) 1) |
158
|
156
|
105
|
|||
|
|
|
|
|
|
|
|
| Share-based
payment expensed in the Income statement |
463
|
259
|
331
|
|||
|
|
|
|
|
|
|
1) Includes long-term share-based incentive programme for 2007 to 2010 and share option programme for 2005 and 2006.
Employee
shares
In 2010,
a general employee share programme was implemented in Den-mark. Approximately
11,000 employees have purchased 567,000 shares at a price of DKK 275 per share.
Outside Denmark the programme is structured as share options with the same initial benefit per employee as in Denmark. Approximately 15,000 employees have been granted share options and it is estimated that approximately 273,000 share options will be exercised when the options vest in three years.
Long-term
share-based incentive programme
For a
description of the programme, please refer to the Remuneration report’
in the section Corporate governance, remuneration and leadership, pp 46–
49.
The Board of Directors on 1 February 2011 approved the establishment of a joint pool, for members of the Senior Management Board, for the financial year 2010 by allocating a total of 169,025 Novo Nordisk B shares. This allo cation amounts to eight months of fixed base salary plus pension contribution on average per participant, corresponding to a value at launch of the programme of DKK 64 million. This amount was expensed in 2010. The share price used for the conversion was the average share price (DKK 379) for Novo Nordisk B shares on NASDAQ OMX Copenhagen from 2–16 February 2010. Based on the split of participants at the establishment of the joint pool, approximately 30% of the pool will be allocated to members of Executive Management and 70% to members of the Senior Management Board.
The shares allocated to the joint pool for 2007 (166,292 shares), corresponding to a value at launch of the programme of DKK 43 million expensed in 2007, were released to the individual participants on 1 February 2011 following the approval of the Annual Report 2010 by the Board of Directors.
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 2007 (477,832 shares), corresponding to a value at launch of the programme of DKK 135 million amortised over the period 2007–2010, were released to the individual participants on 1 February 2011 following the approval of the Annual Report 2010 by the Board of Directors. The number of shares to be transferred is lower than the original number of shares allocated to the share pool as some participants have left the company before the release conditions of the programme have been met.
For 2009, this group consisted of about 675 employees. The allocation to the joint pool was DKK 186 million, corresponding to 605,218 shares. The cost of this allocation will be amortised over the period 2009–2012.
For 2010, this group consisted of about 700 employees. The allocation to the joint pool was DKK 208 million, corresponding to 548,936 shares. The cost of this allocation will be amortised over the period 2010–2013.
The total number of shares in the joint pools relating to the years 2008, 2009 and 2010 is as follows:
|
Year
allocated to pool
|
Number
of
shares
|
Vesting
|
||
|
|
|
|
|
|
| Senior Management Board | ||||
| 2008 1) | 166,302 |
2012
|
||
| 2009 | 177,066 |
2013
|
||
| 2010 | 169,025 |
2014
|
||
|
|
|
|
|
|
| 512,393 | ||||
| Management group below | ||||
| Senior Management Board | ||||
| 2008 | 570,390 |
2012
|
||
| 2009 | 605,218 |
2013
|
||
| 2010 | 548,936 |
2014
|
||
| Cancelled | (62,590) | |||
|
|
|
|
|
|
| 1,661,954 | ||||
|
|
|
|
|
|
| Total | 2,174,347 | |||
|
|
|
|
|
1) The number of shares in the joint pool for 2008 has been reduced due to termination of an international member of the Senior Management Board.
For the service entities NNIT and NNE Pharmaplan, separate share-based incentive programmes have been set up that are similar to the general Novo Nordisk programme but operate with entity-specific targets.
Share
options
Novo
Nordisk established share option schemes in 1998–2006 with the purpose
of motivating and retaining a qualified management group and to ensure common
goals for Management and the owners. Each option gives the right to purchase
one Novo Nordisk B share. All share options are hedged by treasury shares.
No 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 when 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 historic volatility – average of daily volatilities.
The assumptions used are shown in the table below:
|
2010
|
2009
|
2008
|
||||
|
|
|
|
|
|
|
|
| Expected life of the option in years | ||||||
| (average) | 4 | 6 | 6 | |||
| Expected volatility | 21% | 26% | 29% | |||
| Expected dividend per share (in DKK) | 10.00 | 7.50 | 6.00 | |||
| Risk-free interest rate | ||||||
| (based on Danish government bonds) | 2.00% | 2.00% | 3.00% | |||
| Novo Nordisk B share price | ||||||
| at the end of the year | 629 | 332 | 271 | |||
|
|
|
|
|
|
|
|
Novo Nordisk Annual Report 2010 81
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
28 Share-based payment schemes (continued)
| Outstanding share options in Novo Nordisk |
Share
options |
Average
exercise
price
per
option
DKK
|
Fair
value
DKK
million
|
Calculated
fair
value
per
option
DKK
|
||||
|
|
|
|
|
|
|
|
|
|
| Outstanding at the end of 2008 | 6,918,332 |
133
|
948
|
137
|
||||
| Exercised in 2009: | ||||||||
| Of 2000 ordinary share option plan | (258,341 | ) |
99
|
(35
|
) |
137
|
||
| Of 2001 ordinary share option plan | (113,484 | ) |
166
|
(15
|
) |
137
|
||
| Of 2003 ordinary share option plan | (148,255 | ) |
97.5
|
(20
|
) |
137
|
||
| Of 2004 ordinary share option plan | (186,350 | ) |
133.5
|
(25
|
) |
137
|
||
| Of 2005 ordinary share option plan | (500,225 | ) |
153
|
(69
|
) |
137
|
||
| Of 2008 employee share options 1) | (1,530 | ) |
0
|
0
|
137
|
|||
| Expired in 2009 | (5,000 | ) |
99
|
(1
|
) |
137
|
||
| Cancelled in 2009 | (105,700 | ) |
133
|
(14
|
) |
137
|
||
| Value adjustment 2) |
287
|
|||||||
|
|
|
|
|
|
|
|
|
|
| Outstanding at the end of 2009 | 5,599,447 |
135
|
1,056
|
189
|
||||
| Employee share options granted in 2010 1) | 273,000 |
163
|
597
|
|||||
| Exercised in 2010: | ||||||||
| Of 2001 ordinary share option plan | (370,400 | ) |
166
|
(70
|
) |
189
|
||
| Of 2003 ordinary share option plan | (281,275 | ) |
97.5
|
(53
|
) |
189
|
||
| Of 2004 ordinary share option plan | (297,000 | ) |
133.5
|
(56
|
) |
189
|
||
| Of 2005 ordinary share option plan | (427,600 | ) |
153
|
(81
|
) |
189
|
||
| Of 2006 ordinary share option plan | (986,847 | ) |
175
|
(186
|
) |
189
|
||
| Of 2008 employee share options 1) | (2,170 | ) |
0
|
0
|
189
|
|||
| Expired in 2010 | (57,708 | ) |
166
|
(11
|
) |
189
|
||
| Cancelled in 2010 | (12,553 | ) |
135
|
(2
|
) |
189
|
||
| Value adjustment 2) |
950
|
|||||||
|
|
|
|
|
|
|
|
|
|
| Outstanding at the end of 2010 | 3,436,894 |
110
|
1,710
|
498
|
||||
|
|
|
|
|
|
|
|
|
1) Granted to all employees outside Denmark under the 2008 and 2010 employee share option programme,
with a benefit equal to the benefit obtained by the Danish-based employees under the employee share programme.
2) 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
| Share options in Novo Nordisk |
At
the
beginning
of
the year
|
Exercised
during
the
year
|
Additions
during
the
year 3)
|
At
the end
of
the year
|
Fair
value 4)
DKK
million
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management: | ||||||||||
| Lars Rebien Sørensen | 68,000 | 29,000 | 39,000 | 20.4 | ||||||
| Jesper Brandgaard | 33,000 | 14,500 | 18,500 | 9.7 | ||||||
| Lise Kingo | 19,000 | 19,000 | – | – | ||||||
| Kåre Schultz | – | – | – | |||||||
| Mads Krogsgaard Thomsen | 33,000 | 14,500 | 18,500 | 9.7 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management in total | 153,000 | 77,000 | – | 76,000 | 39.8 | |||||
| Other members of the Senior Management Board in total | 242,950 | 117,650 | 50 | 125,350 | 59.6 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total | 395,950 | 194,650 | 50 | 201,350 | 99.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
3) Additions during the year cover the holdings of share options by the Senior Management Board members
appointed in 2010.
4) The fair value has been calculated using the Black-Scholes model with the parameters existing at
year-end of the respective year.
The total number of options to acquire B shares held by Executive Management as of 1 February 2011 equals 76,000 and the specific conditions are from the ordinary 2003 share option plan. The 76,000 options are held with an exercise price of DKK 97.5. The exercise period is from 6 February 2007 until 5 February 2012.
82 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
28 Share-based payment schemes (continued)
| Exercisable and outstanding share options in Novo Nordisk |
Issued
share
options
|
Exercised
share
options
|
Expired
|
Cancelled
|
Outstanding/
exercisable
share
options
|
Exercise
price
DKK
|
Exercise
period
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2001 Ordinary share option plan | 1,369,960 | (1,216,464 | ) |
(57,708
|
) | (95,788 | ) | – | 166 | 8/2/05 – 7/2/10 | ||||
| 2003 Ordinary share option plan | 2,185,000 | (1,633,765 | ) | (82,666 | ) | 468,569 | 98 | 6/2/07 – 5/2/12 | ||||||
| 2004 Ordinary share option plan | 1,618,832 | (1,049,866 | ) | (118,000 | ) | 450,966 | 134 | 31/1/08 – 30/1/13 | ||||||
| 2005 Ordinary share option plan | 1,640,468 | (927,825 | ) | (152,818 | ) | 559,825 | 153 | 31/1/09 – 30/1/14 | ||||||
| 2006 Ordinary share option plan | 2,229,084 | (986,847 | ) | (179,053 | ) | 1,063,184 | 175 | 31/1/10 – 30/1/15 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable at the end of 2010 | 9,043,344 | (5,814,767 | ) |
(57,708
|
) | (628,325 | ) | 2,542,544 | ||||||
| 2008 employee share options | 694,500 | (3,700 | ) | (69,450 | ) | 621,350 | 0 | 1/11/11 | ||||||
| 2010 employee share options | 273,000 | 273,000 | 0 | 1/12/13 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at the end of 2010 5) | 10,010,844 | (5,818,467 | ) |
(57,708
|
) | (697,775 | ) | 3,436,894 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5) All share options will vest if there is a change of control of Novo Nordisk A/S.
| Average market price of Novo Nordisk B shares per trading period in 2010 |
Average
market
price
DKK
|
Exercised
share
options
|
||
|
|
|
|
|
|
| 2 February – 16 February |
379
|
1,596,147 | ||
| 27 April – 11 May |
463
|
391,000 | ||
| 5 August – 19 August |
502
|
153,995 | ||
| 27 October – 10 November |
556
|
224,150 | ||
|
|
|
|
|
|
| Total exercised options | 2,365,292 | |||
|
|
|
|
|
29 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.
| Shares in Novo Nordisk |
At
the beginning
of
the year
|
Addition
during
the year
|
Sold/released
during
the year
|
At
the end
of
the year
|
Market
value 1)
DKK
million
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Board of Directors: | ||||||||||
| Sten Scheibye | 800 | 800 | 0.5 | |||||||
| Göran A Ando | 1,600 | 1,600 | 1.0 | |||||||
| Anne Marie Kverneland | 2,772 | 89 | 270 | 2,591 | 1.6 | |||||
| Henrik Gürtler | – | – | – | |||||||
| Ulrik Hjulmand-Lassen | 755 | 89 | 844 | 0.5 | ||||||
| Jørgen Wedel | 11,000 | 11,000 | 6.9 | |||||||
| Kurt Anker Nielsen | 83,704 | 2,000 | 81,704 | 51.4 | ||||||
| Hannu Ryöppönen | 600 | 1,000 | 1,600 | 1.0 | ||||||
| Pamela J Kirby | – | – | – | |||||||
| Stig Strøbæk | 420 | 70 | 490 | 0.3 | ||||||
| Søren Thuesen Pedersen | 585 | 89 | 365 | 309 | 0.2 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Board of Directors in total | 102,236 | 1,337 | 2,635 | 100,938 | 63.4 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management: | ||||||||||
| Lars Rebien Sørensen | 10,920 | 55,138 | 55,138 | 10,920 | 6.9 | |||||
| Jesper Brandgaard | 420 | 31,969 | 27,430 | 4,959 | 3.1 | |||||
| Lise Kingo | 220 | 36,469 | 36,430 | 259 | 0.2 | |||||
| Kåre Schultz | 45,100 | 17,469 | 62,569 | 39.3 | ||||||
| Mads Krogsgaard Thomsen | 11,888 | 31,969 | 17,430 | 26,427 | 16.6 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management in total | 68,548 | 173,014 | 136,428 | 105,134 | 66.1 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| The Senior Management Board in total | 58,324 | 249,370 | 216,339 | 91,355 | 57.5 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Joint pool for Executive Management and other members of the Senior Management Board 2) |
726,640
|
169,025
|
258,210
|
637,455
|
3) |
401.0
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total | 955,748 | 592,746 | 613,612 | 934,882 | 588.0 | |||||
|
|
|
|
|
|
|
|
|
|
|
| 1) | Calculation of the market value is based on the quoted share price of DKK 629 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 at the establishment of the joint pool, 30% of the pool will be allocated to the members of Executive Management and 70% to other members of the Senior Management Board. In the lock-up period, the joint pool may potentially be reduced in case of lower-than-planned value creation in subsequent years. |
| 3) | Excludes 41,230 shares currently assigned for five retired Senior Management Board members. |
Novo Nordisk Annual Report 2010 83
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
30 Derivative financial instruments
Novo Nordisk uses a number of derivatives to hedge currency exposure. Novo Nordisk’s currency hedging activities are categorised into hedging of forecast transactions (cash flow hedges), hedging of assets and liabilities (fair value hedges) and hedging of net investments. None of the derivatives are held for trading.
Total
hedging activities
The
table below summarises the fair values of all the hedging activities of Novo
Nordisk
| 2010 | 2009 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
| DKK million | Contract amount at year-end |
Positive fair value at year-end |
Negative fair value at year-end |
Contract amount at year-end |
Positive fair value at year-end |
Negative fair value at year-end |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Currency-related instruments | ||||||||||||
| Forward contracts, cash flow hedges | 16,538 | 658 | 18,006 | 418 | 15 | |||||||
| Forward contracts, fair value hedges | 2,318 | 411 | 3,702 | 7 | 56 | |||||||
| Currency options, cash flow hedges | 5,929 | 108 | 3,274 | 37 | ||||||||
| Cross-currency swaps, cash flow hedges | 818 | 20 | 817 | 55 | 51 | |||||||
| Cross-currency swaps, net investment hedges | 166 | 40 | 166 | 3 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total currency-related instruments | 25,769 | 108 | 1,129 | 25,965 | 517 | 125 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest-related instruments | ||||||||||||
| Interest rate swaps, cash flow hedges | 561 | 29 | 560 | 30 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total interest-related instruments | 561 | – | 29 | 560 | – | 30 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total derivatives included in: | ||||||||||||
| Marketable securities and financial instruments | 108 | 517 | ||||||||||
| Current debt and financial instruments | 1,158 | 155 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total hedging activities | 26,330 | 108 | 1,158 | 26,525 | 517 | 155 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Presentation
in the Income statement and Other comprehensive income
The
fair value adjustments are recognised as follows:
| Fair value through the Income statement | ||||||||||||
| Cash flow hedges for which hedge accounting is not applied |
108
|
35
|
92
|
66
|
||||||||
| Fair value hedges |
411
|
7
|
56
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
fair value adjustments through the Income statement
|
108
|
446
|
99
|
122
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value through Other comprehensive income | ||||||||||||
| Cash flow hedges for which hedge accounting is applied | 672 | 418 | 30 | |||||||||
| Net investment hedges | ||||||||||||
| (included in exchange rate adjustment) | 40 | 3 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total fair value adjustments through | ||||||||||||
| Other comprehensive income | – | 712 | 418 | 33 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total fair value adjustments | 108 | 1,158 | 517 | 155 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
30 Derivative financial instruments (continued)
Hedging of forecast transactions (cash flow hedge)
The table below shows the fair value of cash flow hedging activities for 2010 and 2009 specified by hedging instrument and the major currencies. The fair value of the financial instruments qualifying for hedge accounting is recognised directly under Other comprehensive income until the hedged items affect the Income statement. At year-end, a loss of DKK 672 million is deferred via Other comprehensive income (a net gain of DKK 388 million in 2009). The fair values of the financial instruments not qualifying for hedge accounting are recognised directly in the Income statement.
| 2010 | 2009 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
| DKK million | Contract amount at year-end |
Positive fair value at year-end |
Negative fair value at year-end |
Contract amount at year-end |
Positive fair value at year-end |
Negative fair value at year-end |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Hedging of forecast transactions qualifying | ||||||||||||
| for hedge accounting | ||||||||||||
| USD | 11,264 | 292 | 12,799 | 266 | ||||||||
| JPY | 3,605 | 355 | 3,728 | 132 | ||||||||
| GBP | 1,063 | 916 | 20 | |||||||||
| Other | 606 | 11 | 563 | 15 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total forward contracts | 16,538 |
–
|
658 | 18,006 | 418 | 15 | ||||||
| USD | 4,103 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total currency options 1) | 4,103 |
–
|
– | – | – | – | ||||||
| EUR/USD | 504 | 4 | 503 | 11 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cross-currency swaps | 504 |
–
|
4 | 503 | – | 11 | ||||||
| EUR/EUR | 251 | 10 | 250 | 4 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total interest rate swaps | 251 |
–
|
10 | 250 | – | 4 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash flow hedges for which hedge | ||||||||||||
| accounting is applied | 21,396 |
–
|
672 | 18,759 | 418 | 30 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) The positive fair value at year-end 2010 does not qualify for hedge accounting and is consequently disclosed in the table below.
| Other forecast transaction hedges for which hedge accounting is not applied | ||||||||||||
| EUR/USD 2) |
3
|
40
|
||||||||||
| JPY/DKK |
314
|
13
|
314
|
55
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cross-currency swaps |
314
|
–
|
16
|
314
|
55
|
40
|
||||||
| DKK/DKK |
310
|
11
|
310
|
17
|
||||||||
| EUR/EUR 2) |
8
|
9
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total interest rate swaps |
310
|
–
|
19
|
310
|
–
|
26
|
||||||
| USD |
1,826
|
108
|
3,274
|
37
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total currency options |
1,826
|
108
|
–
|
3,274
|
37
|
–
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cash flow hedges for which hedge | ||||||||||||
| accounting is not applied |
2,450
|
108
|
35
|
3,898
|
92
|
66
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total contracts of forecast transactions |
23,846
|
108
|
707
|
22,657
|
510
|
96
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
2) The contract value is disclosed only in the upper table.
The financial contracts existing at the end of the year (cash flow hedges) cover the expected future cash flow for the following number of months:
|
2010
|
2009
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
| USD |
15
months
|
17
months
|
||||||||||
| JPY |
14
months
|
15
months
|
||||||||||
| GBP |
10
months
|
14
months
|
||||||||||
| CNY 3) |
12
months
|
17
months
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
3) USD used as proxy when hedging Novo Nordisk’s CNY currency exposure.
The maturity of the swaps existing at the end of 2010 is December 2011 and December 2012 (December 2011 and December 2012 at the end of 2009).
Novo Nordisk Annual Report 2010 85
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
30 Derivative financial instruments (continued)
Hedging
of assets and liabilities (fair value hedge)
The table
below shows the fair value of fair value hedging activities for 2010 and 2009
specified by hedging instrument and the major currencies. All changes in fair
values are recognised in the Income statement, amounting to a loss of DKK 411
million in 2010 (a net loss of DKK 49 million in 2009). 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.
| 2010 | 2009 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
| DKK million | Contract amount at year-end |
Positive fair value at year-end |
Negative fair value at year-end |
Contract amount at year-end |
Positive fair value at year-end |
Negative fair value at year-end |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| USD | 890 | 225 | 2,092 |
25
|
||||||||
| JPY | 647 | 166 | 764 |
13
|
||||||||
| GBP | 262 | 7 | 304 |
7
|
||||||||
| Other | 519 | 13 | 542 |
18
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total forward contracts | 2,318 |
–
|
411 | 3,702 |
7
|
56
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total hedging of assets and liabilities | 2,318 |
–
|
411 | 3,702 |
7
|
56
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Hedging
of net investments in foreign subsidiaries (net investment hedge)
The
table below shows the fair value of hedging activities relating to net investments
in foreign subsidiaries for 2010 and 2009 specified by hedging instrument and
the major currencies. All changes in fair values relating to currency are recognised
directly in Other comprehensive income, amounting to a loss of DKK 40 million
in 2010 (a loss of DKK 3 million in 2009). All changes relating to interest
rates are recognised in the Income statement, amounting to DKK 1 million in
2010 (DKK 1 million in 2009).
| 2010 | 2009 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
| DKK million | Contract amoun tat year-end |
Positive fair value at year-end |
Negative fair value at year-end |
Contract amount at year-end |
Positive fair value at year-end |
Negative |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cross-currency swap JPY/DKK |
166
|
40
|
166
|
3
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total hedging of net investments in foreign subsidiaries |
166
|
–
|
40
|
166
|
–
|
3
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The maturity of the swap existing at the end of 2010 is November 2012.
The financial contracts existing at the end of the year hedges 15% (16% in 2009) of the net investments in JPY. No other net investments have been hedged.
86 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
31 Commitments and contingencies
Commitments
The total contractual obligations and recognised non-current debt as of 31 December
2010 can be specified as follows:
Payments due by period
| DKK million |
Less
than one year |
One
to three years |
Three
to five years |
More
than five years |
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current debt | – | 48 | 97 | 359 | 504 | |||||
| Retirement benefit | ||||||||||
| obligations | 17 | 33 | 31 | 488 | 569 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total non-current | ||||||||||
| liabilities recognised | ||||||||||
| in the Balance sheet | 17 | 81 | 128 | 847 | 1,073 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Interest payments related | ||||||||||
| to non-current debt | 8 | 16 | 13 | 22 | 59 | |||||
| Operating leases 1) | 785 | 1,147 | 682 | 813 | 3,427 | |||||
| Purchase obligations | 1,386 | 1,327 | 1,361 | 189 | 4,263 | |||||
| Research and develop- | ||||||||||
| ment obligations | 1,078 | 876 | 475 | 81 | 2,510 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total obligations | ||||||||||
| not recognised in the | ||||||||||
| Balance sheet | 3,257 | 3,366 | 2,531 | 1,105 | 10,259 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total contractual | ||||||||||
| obligations | 3,274 | 3,447 | 2,659 | 1,952 | 11,332 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
As of 31 December 2009 the contractual obligations and recognised non-current debt are specified as follows:
Payments due by period
| DKK million |
Less
than
one
year
|
One
to
three
years
|
Three
to
five
years
|
More
than
five
years
|
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current debt | – | 467 | 96 | 407 | 970 | |||||
| Retirement benefit | ||||||||||
| obligations | 14 | 26 | 25 | 391 | 456 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total non-current | ||||||||||
| liabilities recognised | ||||||||||
| in the Balance sheet | 14 | 493 | 121 | 798 | 1,426 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Interest payments related | ||||||||||
| to non-current debt | 8 | 14 | 12 | 24 | 58 | |||||
| Operating leases 1) | 670 | 1,000 | 661 | 679 | 3,010 | |||||
| Purchase obligations | 1,522 | 442 | 67 | 20 | 2,051 | |||||
| Research and develop- | ||||||||||
| ment obligations | 1,742 | 201 | 23 | 23 | 1,989 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total obligations | ||||||||||
| not recognised in the | ||||||||||
| Balance sheet | 3,942 | 1,657 | 763 | 746 | 7,108 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Total contractual | ||||||||||
| obligations | 3,956 | 2,150 | 884 | 1,544 | 8,534 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
1) No material finance lease obligations exist in 2010 and 2009.
The latest interest rate fixing has been used to compute the contractual obligation for interest on variable-rate debt instruments.
The operating lease commitments are related to non-cancellable operating leases primarily related to premises, company cars and office equipment. Approximately 68% of the commitments are related to leases outside Denmark. The lease costs for 2010 and 2009 were DKK 933 million and DKK 615 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 flows from operations.
Research and development obligations contain uncertainties in relation to the period in which payments are due as 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 comprise post-approval study on the LEADER® programme.
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Other guarantees | 555 | 443 | ||
| Other guarantees primarily relate to guarantees | ||||
| issued by Novo Nordisk in relation to rented | ||||
| property | ||||
| Security for debt | 1,366 | 1,459 | ||
| Land, buildings and equipment etc at carrying | ||||
| amount | ||||
|
|
|
|
|
World
Diabetes Foundation
At the Annual General Meeting of Novo Nordisk A/S in 2002, the share- holders
agreed on a donation to the World Diabetes Foundation, 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 supplement to the existing obligation was agreed on 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.
However, annual donations for 2010 shall not exceed the lower of DKK 70 million or 15% of the taxable income of Novo Nordisk A/S, and for the period 2011–2017 the lower of DKK 80 million or 15% of the taxable income of Novo Nordisk A/S in the financial year in question.
In 2010 the donation amounts to DKK 69 million (DKK 68 million in both 2009 and 2008), which is recognised in Administrative expenses in the Income statement. In addition Novo Nordisk has committed to pay an amount of DKK 25 million for the period covering 2011–2012 to support predetermined WDF activities.
Contingencies
Novo Nordisk
is currently involved in pending litigations, claims and investigations arising
out of the normal conduct of its business. Whilst provisions have been made
for probable losses that Management deems to be reasonable or appropriate, there
are uncertainties connected with these estimates. The below description of legal
matters also include some of the provisions made.
See note 1 for the principles for making accounting estimates and judgements about pending and potential future litigation outcomes.
Novo Nordisk Annual Report 2010 87
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
31 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 pro duct liability lawsuits related to hormone therapy products. These lawsuits currently involve a total of 50 individuals (as compared to 52 individuals in February 2010) 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, 72 individuals (as compared to 63 individuals in February 2010) currently allege, in relation to similar lawsuits against Pfizer Inc., that they also have used a Novo Nordisk hormone therapy product. Currently, Novo Nordisk does not have any trials scheduled in 2011. 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 alleges that Novo Nordisk breached an alleged contract with Menarini for the sale and distribution of insulin and insulin analogues in the Italian market or, in the alternative, 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 May 2011. Novo Nordisk cannot predict how long the litigation will take or when it will be able to provide additional information. At this point in time, 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 Inc. is currently a defendant in two separate cases filed in the US alleging that Novo Nordisk and a number of other pharmaceutical companies provided a false Average Wholesale Price for certain drugs covered by Medicaid. These cases have been brought by the State of Alabama and the State of Louisiana. Novo Nordisk was dismissed from a similar action brought by the State of Mississippi. In 2010, Novo Nordisk settled similar cases brought by three New York Counties. 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 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 December
2005, the office of the US Attorney for the Eastern District of New York issued
a subpoena directed to Novo Nordisk calling for the production of documents
relating to Novo Nordisk’s US marketing and promotional practices. Novo
Nordisk assesses that the investigation is limited to its insulin products.
The subpoena indicates that the documents are necessary for the investigation
of potential criminal offences relating to healthcare benefit programmes.
Novo Nordisk is cooperating with the US Attorney in this investigation. At
this point in time, Novo Nordisk cannot determine or predict the outcome of
the investigation. In addition, Novo Nordisk cannot predict how long the investigation
will take or when the company will be able to provide additional information.
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 Iraq Oil for Food Programme. Novo Nordisk must comply with the DPA (including US regulation related to the Foreign Corrupt Practices Act and Foreign Assets Control) in order for the case to be dismissed. If Novo Nordisk breaches the DPA, the prosecution may resume.
In light of the DPA, Novo Nordisk has identified and self-reported certain US Foreign Assets Control concerns to the US authorities. At this point in time, Novo Nordisk cannot determine or predict the outcome or when the next update related to this case will be available.
In January 2010, the Inspector General of the US Department of Defense issued a subpoena directed to Novo Nordisk to provide documents relating to NovoSeven®. Novo Nordisk is cooperating with the Office of the Inspector General and the US Attorney’s Office for the District of Maryland in responding to the subpoena, but cannot, at this point in time, determine or predict the outcome of the investigation or when the next update related to this case will be available given the unpredictable nature of these investigations.
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) containing claims directed to the use of repaglinide in combination with metformin. In January 2011, the District Court ruled that Novo Nordisk’s US patent No. 6,677,358, which covers the combination use of repaglinide and metformin for the treatment of type 2 diabetes, is invalid and unenforceable, the latter due to inequitable conduct. Novo Nordisk has on 26 January 2011 filed an appeal to the US Court of Appeals for the Federal Circuit.
Also pending before the District Court in Michigan and the US District Court for the District of Minnesota are separate cases where a putative class of direct purchasers of Prandin® and Paddock Laboratories, Inc., respectively assert that Novo Nordisk has violated US antitrust laws in delaying the entry of generic versions of Prandin®. Lastly, Novo Nordisk is involved in litigation with Sandoz Inc. and Lupin Ltd. in the US District Court for the Southern District of New York in which Novo Nordisk asserts that Sandoz & Lupin’s ANDAs to produce a generic version of PrandiMet® (repaglinide/metformin HCl) infringe Novo Nordisk’s patent.
At present, it is unclear whether or when a generic version of Prandin® or PrandiMet® will be available in the US market.
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.
Liability
for the debts and obligations of Novozymes following the demerger of Novozymes
in 2000
Novo
Nordisk A/S and Novozymes A/S are subject to joint and several liabilities
for any obligation that existed at the time of the announcement of the demerger
in 2000. At the end of the year, the remaining part of the joint and several
liabilities in Novozymes A/S amounted to DKK 557 million (DKK 557 million
in 2009).
Debts and obligations pertaining to the period before 1 January 2000, which are recognised after 1 January 2000 and which cannot be clearly attributed to either Novo Nordisk A/S or Novozymes A/S, will be distributed proportionally between the two companies according to an agreement established in connection with the demerger in November 2000.
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 54–56. For information on change of control clauses in share option programmes, please refer to note 28, ‘Share-based payment schemes’ on pp 81–83 and in relation to employee contracts of Executive Management of Novo Nordisk, please refer to the ‘Remuneration report’ in the section Corporate governance, remuneration and leadership, pp 46– 49.
In addition, Novo Nordisk discloses that the Group has 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 take-over bid. If effected, a takeover could – at the discretion of each relevant counterparty – lead to the termination of one or more of such agreements and a total loss of approximately 5% of Novo Nordisk’s sales, corresponding to approximately 4% of Novo Nordisk‘s gross profit.
88 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
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 72.8% 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. Following the demerger of Novozymes in November 2000, Novo Nordisk A/S has access to certain assets of and may purchase certain services from Novo A/S and the Novozymes Group, and vice versa. All agreements relating to such assets and services are based on the list prices used for sales to third parties, where such list prices exist, or the price has been set at what is regarded as the market price. Most of these agreements cover one year.
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 August to 19 August 2010 in the open window following the announcement of the financial results for the second quarter of 2010.
In 2009, Novo Nordisk A/S acquired 3,570,000 B shares, worth DKK 1.1 billion, from Novo A/S as part of the DKK 19 billion share repurchase programme. The transaction price was DKK 311 per share and was calculated as the average market price from 6 August to 7 August 2009 in the open window following the announcement of the financial results for the second quarter of 2009.
In 2008, Novo Nordisk A/S acquired 3,304,800 B shares, worth DKK 1.0 billion, from Novo A/S as part of the share repurchase programme. The trans action price was DKK 307 per share and was calculated as the average market price from 7 August to 13 August 2008 in the open window following the announcement of the financial results for the second quarter of 2008.
The Group has had the
following material transactions with related parties (income)/expense:
|
DKK
million
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Novo Nordisk Foundation | ||||||
| Donations to Novo Nordisk | (38 | ) | (32 | ) | (29 | ) |
| Novo A/S | ||||||
| Services provided by Novo Nordisk | (3 | ) | (8 | ) | (6 | ) |
| Purchase of Novo Nordisk B shares | 2,567 | 1,111 | 1,016 | |||
| Sale of treasury shares | ||||||
| (related to share options) | (2 | ) | (2 | ) | (9 | ) |
| Novozymes | ||||||
| Services provided by Novo Nordisk | (395 | ) | (357 | ) | (284 | ) |
| Services provided by Novozymes | 83 | 118 | 147 | |||
| Associated companies | ||||||
| Purchased intangible assets, fees | ||||||
| and royalties etc paid to associated | ||||||
| companies by Novo Nordisk | 16 | 184 | 40 | |||
| Received intangible assets, fees | ||||||
| and royalties etc from associated | ||||||
| companies to Novo Nordisk | (4 | ) | – | (12 | ) | |
|
|
|
|
|
|
|
|
Transactions with associated companies are included up until the date of transfer or disposal.
There are no contingent liabilities towards associated companies.
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 the ‘Remuneration report’ in the section Corporate governance, remuneration and leadership, pp 46– 49. There have not been and are no loans to the Board of Directors or Executive Management in 2010, 2009 and 2008.
There are no material unsettled transactions with related parties at the end of the year.
Novo Nordisk Annual Report 2010 89
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
33 Companies in the Novo Nordisk Group
| Activity | ||||||||||||||||||
|
|
|
|
|
|||||||||||||||
|
Country
|
Year
of
incorporation/ acquisition |
Currency
|
Issued
share capital/ paid-in capital |
Percentage
of shares owned |
Production | Sales
and marketing |
Research
and development |
Services/ investments |
||||||||||
|
|
|
• | • | • | • | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Parent company | ||||||||||||||||||
| Novo Nordisk A/S |
Denmark
|
1931
|
DKK
|
600,000,000
|
–
|
• | • | • | • | |||||||||
| Subsidiaries by region | ||||||||||||||||||
| Europe | ||||||||||||||||||
| Novo Nordisk Pharma GmbH |
Austria
|
1974
|
EUR
|
36,336
|
100
|
• | ||||||||||||
| SA Novo Nordisk Pharma NV |
Belgium
|
1974
|
EUR
|
69,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma d.o.o. |
Bosnia-Herzegovina
|
2009
|
BAM
|
97.792
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma EAD |
Bulgaria
|
2005
|
BGN
|
5,880,000
|
100
|
• | ||||||||||||
| Novo Nordisk Hrvatska d.o.o. |
Croatia
|
2004
|
HRK
|
5,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk s.r.o. |
Czech
Republic
|
1997
|
CZK
|
14,500,000
|
100
|
• | ||||||||||||
| Novo Nordisk Region Europe A/S |
Denmark
|
2002
|
DKK
|
108,370,500
|
100
|
• | ||||||||||||
| Novo Nordisk Farma OY |
Finland
|
1972
|
EUR
|
420,500
|
100
|
• | ||||||||||||
| Novo Nordisk Pharmaceutique SAS |
France
|
2003
|
EUR
|
5,821,140
|
100
|
• | ||||||||||||
| Novo Nordisk Production SAS |
France
|
1959
|
EUR
|
57,710,220
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma GmbH |
Germany
|
1973
|
EUR
|
614,062
|
100
|
• | ||||||||||||
| Novo Nordisk Hellas Epe. |
Greece
|
1979
|
EUR
|
1,050,000
|
100
|
• | ||||||||||||
| Novo Nordisk Hungária Kft. |
Hungary
|
1996
|
HUF
|
371,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Limited |
Ireland
|
1978
|
EUR
|
635
|
100
|
• | ||||||||||||
| Novo Nordisk Farmaceutici S.P.A. |
Italy
|
1980
|
EUR
|
516,500
|
100
|
• | ||||||||||||
| UAB Novo Nordisk Pharma |
Lithuania
|
2005
|
LTL
|
2,150,000
|
100
|
• | ||||||||||||
| Novo Nordisk Farma dooel |
Macedonia
|
2006
|
MKD
|
14,068,285
|
100
|
• | ||||||||||||
| Novo Nordisk B.V. |
Netherlands
|
1983
|
EUR
|
61,155
|
100
|
• | ||||||||||||
| Novo Nordisk Scandinavia AS |
Norway
|
1965
|
NOK
|
250,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma Sp. z.o.o. |
Poland
|
1996
|
PLN
|
29,021,000
|
100
|
• | ||||||||||||
| Novo Nordisk Comércio Produtos Farmaceuticos Lda. |
Portugal
|
1984
|
EUR
|
250,000
|
100
|
• | ||||||||||||
| Novo Nordisk Farma S.R.L. |
Romania
|
2005
|
RON
|
2,795,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma d.o.o. Belgrade (Serbia) |
Serbia
|
2005
|
EUR
|
640,000
|
100
|
• | ||||||||||||
| Novo Nordisk Slovakia s.r.o. |
Slovakia
|
2007
|
EUR
|
265,552
|
100
|
• | ||||||||||||
| Novo Nordisk, trženje farmacevtskih izdelkov d.o.o. |
Slovenia
|
2006
|
EUR
|
2,679,286
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma S.A. |
Spain
|
1978
|
EUR
|
1,502,500
|
100
|
• | ||||||||||||
| Novo Nordisk Scandinavia AB |
Sweden
|
1971
|
SEK
|
100,000
|
100
|
• | ||||||||||||
| Novo Nordisk FemCare AG |
Switzerland
|
2003
|
CHF
|
1,100,000
|
100
|
• | • | • | ||||||||||
| Novo Nordisk Health Care AG |
Switzerland
|
2000
|
CHF
|
159,325,000
|
100
|
• | • | • | ||||||||||
| Novo Nordisk Pharma AG |
Switzerland
|
1968
|
CHF
|
50,000
|
100
|
• | ||||||||||||
| Novo Nordisk Holding Limited |
United
Kingdom
|
1977
|
GBP
|
2,802,130
|
100
|
• | ||||||||||||
| Novo Nordisk Limited |
United
Kingdom
|
1978
|
GBP
|
2,350,000
|
100
|
• | ||||||||||||
| North America | ||||||||||||||||||
| Novo Nordisk Canada Inc. |
Canada
|
1983
|
CAD
|
200
|
100
|
• | ||||||||||||
| Novo Nordisk Region North America A/S |
Denmark
|
2003
|
DKK
|
500,000
|
100
|
• | ||||||||||||
| Novo Nordisk US Holdings Inc. |
United
States
|
2007
|
USD
|
50,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharmaceutical Industries Inc. |
United
States
|
1991
|
USD
|
55,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Inc. |
United
States
|
1982
|
USD
|
283,837,600
|
100
|
• | • | |||||||||||
| Japan & Korea | ||||||||||||||||||
| Novo Nordisk Region Japan & Oceania A/S |
Denmark
|
2002
|
DKK
|
15,500,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma Ltd. |
Japan
|
1980
|
JPY
|
2,104,000,000
|
100
|
• | • | • | ||||||||||
| Novo Nordisk Pharma Korea Ltd. |
South
Korea
|
1994
|
KRW
|
6,108,400,000
|
100
|
• | ||||||||||||
90 Novo Nordisk Annual Report 2010
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
33 Companies in the Novo Nordisk Group (continued)
| Activity | ||||||||||||||||||
|
|
||||||||||||||||||
|
Country
|
Year
of
incorporation/ acquisition |
Currency
|
Issued
share capital/ paid-in capital |
Percentage
of shares owned |
Production | Sales
and marketing |
Research
and development |
Services/ investments |
||||||||||
| • | • | • | • | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| International Operations | ||||||||||||||||||
| Aldaph SpA | Algeria |
1994
|
DZD
|
1,742,650,000
|
100
|
• | • | |||||||||||
| Novo Nordisk Pharma Argentina S.A. | Argentina |
1997
|
ARS
|
7,465,150
|
100
|
• | ||||||||||||
| Novo Nordisk Pharmaceuticals Pty. Ltd. | Australia |
1985
|
AUD
|
500,001
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma (Private) Limited | Bangladesh |
2007
|
BDT
|
17,500,000
|
100
|
• | ||||||||||||
| Novo Nordisk Produção Farmacêutica do Brasil Ltda. | Brazil |
2002
|
BRL
|
896,834,727
|
100
|
• | ||||||||||||
| Novo Nordisk Farmacêutica do Brasil Ltda. | Brazil |
1990
|
BRL
|
84,727,136
|
100
|
• | ||||||||||||
| Novo Nordisk Farmacêutica Limitada | Chile |
2006
|
CLP
|
758,271,200
|
100
|
• | ||||||||||||
| Novo Nordisk (China) Pharmaceuticals Co., Ltd. | China |
1994
|
USD
|
371,155,362
|
100
|
• | • | |||||||||||
| Beijing Novo Nordisk Pharmaceuticals Science & | ||||||||||||||||||
| Technology Co., Ltd. | China |
2006
|
USD
|
2,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma Operations A/S | Denmark |
2009
|
DKK
|
500,000
|
100
|
• | ||||||||||||
| Novo Nordisk Region International Operations A/S | Denmark |
2002
|
DKK
|
113,303,310
|
100
|
• | ||||||||||||
| Novo Nordisk Egypt LLC | Egypt |
2004
|
EGP
|
50,000
|
100
|
• | ||||||||||||
| Novo Nordisk Hong Kong Limited | Hong Kong |
2001
|
HKD
|
500,000
|
100
|
• | ||||||||||||
| Novo Nordisk India Private Limited | India |
1994
|
INR
|
265,000,000
|
100
|
• | • | |||||||||||
| PT. Novo Nordisk Indonesia | Indonesia |
2003
|
IDR
|
827,900,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pars | Iran |
2005
|
IRR
|
10,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Ltd | Israel |
1997
|
ILS
|
100
|
100
|
• | ||||||||||||
| Novo Nordisk Lebanon | Lebanon |
2007
|
LBP
|
600,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma (Malaysia) Sdn Bhd | Malaysia |
1992
|
MYR
|
500,000
|
100
|
• | ||||||||||||
| Novo Nordisk Mexico S.A. de C.V. | Mexico |
2004
|
MXN
|
387,816,547
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma SAS | Morocco |
2006
|
MAD
|
2,597,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharmaceuticals Ltd. | New Zealand |
1990
|
NZD
|
1,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Nigeria Ltd. | Nigeria |
2006
|
NGN
|
10,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma (Private) Limited | Pakistan |
2005
|
PKR
|
43,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharmaceuticals (Philippines) Inc. | Philippines |
1999
|
PHP
|
50,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Limited Liability Company | Russia |
2003
|
RUB
|
188,243,360
|
100
|
• | ||||||||||||
| Novo Nordisk Production Support LLC | Russia |
2010
|
RUB
|
5,100,000
|
100
|
• | ||||||||||||
| Novo Investment Pte Limited | Singapore |
1994
|
SGD
|
12,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma (Singapore) Pte Ltd. | Singapore |
1997
|
SGD
|
200,000
|
100
|
• | ||||||||||||
| Novo Nordisk (Pty) Limited | South Africa |
1959
|
ZAR
|
8,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma (Taiwan) Ltd. | Taiwan |
1990
|
TWD
|
9,000,000
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma (Thailand) Ltd. | Thailand |
1983
|
THB
|
15,500,000
|
49
|
• | ||||||||||||
| Novo Nordisk Tunisie SARL | Tunisia |
2004
|
TND
|
400,000
|
100
|
• | ||||||||||||
| Novo Nordisk Saglik Ürünleri Tic. Ltd. Sti. | Turkey |
1993
|
TRY
|
25,296,300
|
100
|
• | ||||||||||||
| Novo Nordisk Pharma Gulf FZ-LLC | United Arab Emirates |
2005
|
AED
|
100,000
|
100
|
• | ||||||||||||
| Novo Nordisk Venezuela Casa de Representación C.A. | Venezuela |
2004
|
VEF
|
2,250,000
|
100
|
• | ||||||||||||
| Other subsidiaries | ||||||||||||||||||
| FeF Chemicals A/S | Denmark |
1989
|
DKK
|
10,000,000
|
100
|
• | • | |||||||||||
| NNIT A/S 1) | Denmark |
1998
|
DKK
|
1,000,000
|
100
|
• | ||||||||||||
| NNE Pharmaplan A/S 1) | Denmark |
1989
|
DKK
|
500,000
|
100
|
• | ||||||||||||
| Steno Diabetes Center A/S | Denmark |
2008
|
DKK
|
1,000,000
|
100
|
• | • | |||||||||||
| Associated companies | ||||||||||||||||||
| Harno Invest A/S |
Denmark
|
1992
|
DKK
|
70,419,910
|
30
|
• | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) In addition to the listed companies, NNIT A/S and NNE Pharmaplan A/S have their own subsidiaries.
Novo Nordisk Annual Report 2010 91
|
Notes
– Consolidated financial statements
|
Consolidated financial statements |
| Financial definitions | ||
|
ADRs Basic
earnings per share (EPS) Cash
to earnings Diluted
earnings per share Effective
tax rate Equity
ratio Free
cash flow |
Gross
margin Net
profit margin Number
of shares outstanding Operating
profit margin Other
comprehensive income Payout
ratio Return
on equity (ROE) Return
on invested capital (ROIC) |
92 Novo Nordisk Annual Report 2010
|
Supplementary
information – Non-financial statement for the year ended 31 December
|
Consolidated non-financial statement |
Non-financial statement for the year ended 31 December
|
Note
|
2010
|
2009
|
2008
|
|||||
|
|
|
|
|
|
|
|
|
|
| Social performance | ||||||||
| Patients | ||||||||
| Donations to the World Diabetes Foundation (DKK million) | 2 | 69 | 68 | 68 | ||||
| Donations to the Novo Nordisk Haemophilia Foundation (DKK million) | 2 | 15 | 15 | 10 | ||||
| Healthcare professionals trained or educated in diabetes (1,000) (accumulated) | 3 | 1,178 | 805 | 380 | ||||
| People with diabetes trained (1,000) | 3 | 494 | 416 |
N/A
|
1) | |||
| LDCs where Novo Nordisk sells insulin according to the differential pricing policy (%) | 3 | 67 | 73 | 64 | ||||
| Active patent families | 4 | 817 | 905 | 890 | ||||
| New patent families (first filings) | 4 | 62 | 55 | 71 | ||||
| Animals purchased | 5 | 62,927 | 57,315 | 57,253 | ||||
| People participating in clinical trials | 6 | 19,361 | 11,130 | 13,822 | ||||
| Employees | ||||||||
| Employees (total) | 7 | 30,483 | 29,329 | 27,068 | ||||
| Employee turnover (%) | 7 | 9.1 | 8.3 | 12.1 | ||||
| Absence (%) | 8 | 2.4 | 2.6 | 2.2 | ||||
| Frequency of occupational injuries (number/million working hours) | 8 | 4.9 | 4.3 | 5.4 | ||||
| Annual training costs per employee (DKK) | 7 | 14,207 | 13,283 | 13,192 | ||||
| Engaging culture (employee engagement) on a scale of 1–5 | 7 | 4.3 | 4.3 | 4.2 | ||||
| Diverse senior management teams (%) | 7 | 54 | 50 | 43 | ||||
| Employment impact worldwide (direct and indirect jobs) | 9 | 108,248 | 96,468 | 88,521 | ||||
| Assurance | ||||||||
| Company reputation with external key stakeholders on a scale of 0–100 | 10 | 76.1 | 76.3 | 72.4 | ||||
| Employees trained in business ethics (%) | 11 | 98 |
N/A
|
1) |
N/A
|
1) | ||
| Warning letters and re-inspections | 12 | 0 | 0 | 0 | ||||
| Fulfilment of action points from facilitations of the | ||||||||
| Novo Nordisk Way (%) of Management | 13 | 93 | 93 | 92 | ||||
| Supplier audits | 14 | 192 | 196 | 161 | ||||
|
|
|
|
|
|
|
|
|
|
| Environmental performance | ||||||||
| Inputs | ||||||||
| Energy consumption (1,000 GJ) | 15 | 2,234 | 2,246 | 2,533 | ||||
| Water consumption (1,000 m3) | 16 | 2,047 | 2,149 | 2,684 | ||||
| Raw materials and packaging materials (1,000 tons) | 17 | 65 | 79 | 132 | ||||
| Outputs | ||||||||
| CO2 emissions from energy consumption (1,000 tons) | 18 | 95 | 146 | 215 | ||||
| CO2 emissions from refrigerants (1,000 tons) | 18 | 6 | 6 |
N/A
|
1) | |||
| CO2 emissions from transport (1,000 tons) | 18 | 57 |
N/A
|
1) |
N/A
|
1) | ||
| Wastewater (1,000 m3) | 19 | 1,935 | 2,062 | 2,542 | ||||
| Chemical oxygen demand (COD) in wastewater (tons) | 19 | 555 | 617 | 891 | ||||
| Total waste (tons) | 20 | 20,565 | 21,019 | 20,346 | ||||
| Non-hazardous waste (% of total waste) | 20 | 68 | 64 | 70 | ||||
| Breaches of regulatory limit values | 21 | 18 | 10 | 28 | ||||
|
|
|
|
|
|
|
|
|
|
1) N/A denotes values that were not recorded in the respective period.
Novo Nordisk Annual Report 2010 93
|
Supplementary
information – Non-financial statement for the year ended 31 December
|
Consolidated non-financial statement |
Notes to the Consolidated non-financial statements
1 Accounting policies for non-financial data
The accounting policies applied to the preparation of the consolidated non-financial reporting have been consistently applied to the years presented, except as described below in ‘Changes in non-financial accounting policies’.
Standards
for non-financial reporting
The
consolidated non-financial 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 on social respons ibility, reporting
on business strategies and activities on human rights, labour standards, environment
and anti-corruption. 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 2010 can be found at annualreport2010.novonordisk.com
and on UN Global Compact’s website at unglobalcompact.org/COP.
Novo Nordisk has set an ambition that non-financial information be subject to the same types of internal control procedures required of financial data. Novo Nordisk has been working towards this objective since 2008.
Novo Nordisk adheres to the following internationally acknowledged voluntary standards and principles:
| • | AA1000 framework for accountability. The framework 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). |
| • | Global Compact. As a signatory to the UN Global Compact, a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, Novo Nordisk reports on actions during 2010 to implement the 10 principles in the Communication on Progress, which can be found at annualreport2010.novonordisk.com. |
| • | Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines. The guidelines (G3) include the only 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 annualreport2010.novonordisk.com. |
Defining
materiality
It
is Novo Nordisk’s responsibility to ensure that those areas are addressed
in which the company has significant impact. Novo Nordisk has sought inspiration
in AccountAbility’s materiality test to define what is material to Novo
Nordisk’s business and what should be included in the annual reporting.
Non-financial issues are prioritised to be reported either in the printed
annual report (most material; business critical), online (material, often
catering to specific stakeholder interests), or not reported (not material).
The same process applies for the assurance provider’s recommendations.
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. In addition, Novo Nordisk’s external assurance provider is requested to review whether the non-financial performance included in the annual report covers the material aspects. The conclusion is available in the Independent assurance report on non-financial reporting 2010 on p 111.
As a pharmaceutical company, Novo Nordisk’s most material social impact is the company’s contribution to improving care for people with diabetes and other conditions for which Novo Nordisk provides treatments. In assessing benefits for patients, the scope of clinical development programmes and the efforts to expand access are measured. Ensuring that an engaging, safe workplace that supports innovation is created is another important dimension of Novo Nordisk’s social performance. Because it is important to retain society’s trust, the degree to which Novo Nordisk reflects its own values and high ethical standards is also measured and managed. The most material dimension of the environ mental impact is the energy and water used for production and the CO2 emissions from energy consumption. As
the business has grown, with sales and pro duction increasing sub stantially, the focus is on improving ressource efficiency and on using alternative energy to reduce the environmental impact.
For more information on Novo Nordisk’s voluntary reporting, visit annualreport2010.novonordisk.com.
Changes
in non-financial accounting policies
In
2010, there were no material changes to the accounting policies for non-financial
data.
The following accounting policies were adjusted in 2010:
| • | The accounting policy for ‘LDCs where Novo Nordisk sells insulin according to the differential pricing policy’ was previously reported as the number of countries. Reporting in terms of a percentage aligns with the company target, which is defined as a percentage. |
| • | The accounting policy for ‘Diverse senior management teams’ was previously reported in terms of the number of diverse management teams. Reporting in terms of a percentage aligns with the company target, which is defined as a percentage. |
Please refer to the specific accounting policies for further information.
The non-financial statement has been reviewed and new disclosures have been added to reflect current priorities and enhance transparency:
| • | Donations to the World Diabetes Foundation (DKK million) |
| • | Donations to the Novo Nordisk Haemophilia Foundation (DKK million) |
| • | Employees trained in business ethics (%) |
| • | Supplier audits |
| • | CO2 emissions from transport (1,000 tons) |
The review process also resulted in a decision to discontinue reporting on the following in the consolidated non-financial statement:
| • | Managers trained in business ethics (%) |
| • | First-line sales managers trained in business ethics (%) |
| • | Research and development as share of sales |
| • |
CO2
emissions from energy consumption as share of sales
|
The two indicators related to business ethics have been replaced by the indicator on employees trained in business ethics. The replacement is due to a management decision to make business ethics training mandatory for all employees – not just managers. Research and development as share of sales and CO2 emissions from energy consumption as share of sales have been taken out, as they are not used to improve performance.
Principles
of non-financial disclosures
The
consolidated non-financial statement and disclosures cover Novo Nordisk A/S
(the Parent company) and all the companies in which Novo Nordisk A/S directly
or indirectly owns more than 50% of the voting rights or in some other way
has a controlling influence (subsidiaries). Novo Nordisk A/S and these companies
are referred to as the Group.
The environmental disclosures cover the impact from the production of Novo Nordisk’s approved products. See accounting policies for details.
Accounting
policies
To Novo
Nordisk, AA1000APS(2008) is a component in creating a generally applicable
approach to assessing and strengthening the credibility of the company’s
public reporting of non-financial data. Novo Nordisk’s assurance process
has been designed to ensure that the qualitative and quantitative information
that documents non-financial dimensions of performance as well as the systems
that underpin the data and performance are assured. The principles outlined
by AA1000APS(2008) have been applied as described below.
1.
Inclusivity
As a
pharmaceutical company with global reach, Novo Nordisk is committed to being
accountable to those on whom the organisation has an impact and those who
have an impact on Novo Nordisk. Novo Nordisk continuously maps its
stakeholders and has processes in place to ensure inclusion of stakeholder
concerns and expectations. Stakeholder engagement results in stakeholders
being involved in developing and accounting for strategic responses to sustainability
challenges.
94 Novo Nordisk Annual Report 2010
|
Supplementary
information – Non-financial statement for the year ended 31 December
|
Consolidated non-financial statement |
2.
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 company’s future business performance and may support stakeholders
in their decision-making, and are therefore regarded as Novo Nordisk’s
material issues.
3.
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 the interaction and communication with the company. The annual
report reflects how the company is managing its business in ways that respond
to and consider stakeholder concerns and interests.
Social
performance
Donations
to the World Diabetes Foundation
The amount
includes donations in DKK paid out by Novo Nordisk to the World Diabetes Foundation
during the fiscal year.
Donations
to the Novo Nordisk Haemophilia Foundation
The amount
includes donations allocated by Novo Nordisk to the Novo Nordisk Haemophilia
Foundation during the fiscal year.
Healthcare
professionals trained or educated in diabetes
Healthcare
professionals trained or educated in diabetes is an estimated accumulated
number based on registrations by affiliates and corporate functions in Novo
Nordisk. The number reflects the total number of healthcare providers participating
in Novo Nordisk-sponsored training and education activities since the National
Changing Diabetes® programmes were initiated in 2002.
People
with diabetes trained
People
with diabetes trained is an estimated number based on registrations 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 includes activities conducted, organised
or funded by Novo Nordisk. These efforts support improvements in self-care
and chronic disease management.
Least
developed countries where Novo Nordisk sells insulin according to the differential
pricing policy
Novo
Nordisk’s differential pricing policy offers LDCs to buy insulin at or
below 20% of the average prices for insulin in the western world. The western
world is defined as Europe (EU, Switzerland and Norway), the US, Canada and
Japan. The number of LDCs where Novo Nordisk sells insulin 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. For 2009 and 2010, the UN list included
49 countries. For 2006 to 2008, the list included 50 countries.
Active
patent families
Active
patent families is the total number of single inventions covered by at least
one pending or issued patent in one or more countries.
New
patent families (first filings)
New patent
families (first filings) is the number of new patent applications that were
filed during the year.
Animals
purchased
Animals
purchased for studies is the number of animals purchased for all testing undertaken
for Novo Nordisk either in-house or at external contractors. The number of
animals purchased is based on internal registration of purchased animals and
yearly reports from external contractors.
People
participating in clinical trials
The number
of people participating in clinical research (phase 1–4, excluding observational
studies) is measured based on active participants in clinical research during
the year.
Employees
The number
of employees at year-end includes all employees except externals, employees
on unpaid leave, interns, bachelor and master thesis employees and substitutes.
Employee
turnover
The rate
of turnover is calculated as the number of employees, excluding temporary
employees, who left the Group during the financial year compared to the average
number of employees, excluding temporary employees.
Absence
Absence
is calculated as absence due to the employee’s own illness, pregnancy-related
sick leave and occupational injuries and illnesses per working hours in the
year, adjusted for holidays.
Frequency
of occupational injuries
The frequency
of occupational injuries is calculated based on 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.
Annual
training costs per employee
Training
costs are all costs expensed in a specific account in the financial accounts.
The amount covers internal and external training posted in the financial accounts.
Engaging
culture (employee engagement)
Employee
engagement is measured on a scale of 1–5, with 5 being the best score,
and is an average of respondents’ answers to 10 selected questions related
to employees’ engagement in the annual employee survey, eVoice. Employee
engagement is a simple average of answers given by employees. The 10 questions
are the same as in the previous years.
Diverse
senior management teams
Diversity
in 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 referring directly to an executive
vice president/senior vice president.
Employment
impact worldwide (direct and indirect jobs)
Employment
impact worldwide is an estimate of the direct and indirect jobs created by
the Group. 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) and the China Statistical Yearbook,
it reflects part of the company’s socio-economic impact.
Company
reputation
Company
reputation is measured as a mean corporate brand score in four key markets
(China, Germany, the UK and the US) based on feedback from primary care physicians
and secondary care physicians. The survey is performed by an independent external
consultancy firm. The mean corporate brand score is based on company ratings
(scale 0–100) collected through individual online interviews with primary
and secondary care professionals (target groups). In China the survey is conducted
via face-to-face interviews.
Employees
trained in business ethics
The percentage
of employees trained in business ethics covers all employees in Novo Nordisk
except employees on leave and is based on regi strations in training databases
and local archives of employees completing the annual business ethics training.
Warning
letters and re-inspections
Warning
letters and re-inspections is measured as the number of warning letters issued
by the US Food and Drug Adminstration (FDA) in connection with GxP-regulated
and ISO9000-certified areas and the number of re-inspections issued to Novo
Nordisk by any health authority globally. Warning letters issued by the FDA
regarding promotional materials are also included.
Fulfilment
of action points from facilitations of the Novo Nordisk Way of Management
The percentage
of fulfilment of action points arising from facilitations with respect to
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. Timely closure
of action points relates to the company’s adherence to the Novo Nordisk
Way. The reason for using a three-year average as the basis for the calculation
is that action lead time typically varies from a couple of months to more
than a year.
Novo Nordisk Annual Report 2010 95
|
Supplementary
information – Non-financial statement for the year ended 31 December
|
Consolidated non-financial statement |
Supplier
audits
The number
of supplier audits performed includes responsible sourcing audits and quality
audits conducted in the areas of direct spend materials, indirect spend materials
and suppliers to the research and development organisation. Contract and licence
manu facturers are not included.
Environmental
performance
Energy
consumption
Energy
consumption (direct and indirect supply) includes both direct supply of energy
(internally produced energy), ie energy Novo Nordisk produces from natural
gas, fuel oil and other types, and indirect supply of external energy (externally
produced energy), eg electricity, steam and district heat. The consumption
of fuel and externally produced energy is based on meter readings and invoices.
Water
consumption
Water
consumption is based on meter readings and invoices and includes drinking
water, industrial water and steam.
Raw
materials and packaging materials
The consumption
of raw and packaging materials used for production, related processes and
packaging is converted to tons.
CO2
emissions from energy consumption
The
amount of CO2 emissions from energy consumption covers consumption
related to production. The CO2 emissions from energy consumption
are calculated according to the GHG protocol. Emissions of CO2
from energy consumption are based on standard factors for fuel and for
energy on a three-year average of available emission factors from the external
suppliers of energy. Hence, emission factors for 2010 are the three-year average
of 2007 to 2009.
CO2
emissions from refrigerants
CO2
emissions from refrigerants are calculated based on standard factors.
CO2
emissions from transport
CO2
emissions from transport include emissions from worldwide distribution of
semi-finished, 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.
Wastewater
The volume
of wastewater includes process wastewater, sanitary waste-water and drainage
water from fortified areas. The total volume of waste-water 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
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
COD is
a measure of the amount of pollutants in the water and is calculated based
on in-house test results or standard factors.
Total
waste
Total
waste is measured as the sum of non-hazardous and hazardous waste. The amount
of waste disposed of is registered based on weight receipts.
Non-hazardous
waste
The percentage
of non-hazardous waste is calculated as the waste disposed of as non-hazardous
of the total amount of waste disposed.
Breaches
of regulatory limit values
Breaches
of regulatory limit values are measured as all breaches reported to the authorities.
2
Donations
to the World Diabetes Foundation and the Novo Nordisk Haemophilia Foundation
The World Diabetes Foundation and the Novo Nordisk Haemophilia Foundation
are non-profit organisations receiving donations from Novo Nordisk.
In 2010 Novo Nordisk donated DKK 69 million to the World Diabetes Foundation, supporting more than 200 projects covering 96 countries in the developing world to expand access to diabetes treatment and care.
The Novo Nordisk Haemophilia Foundation’s objective is to increase treatment and care in developing countries. In 2010, Novo Nordisk donated DKK 15 million to the Novo Nordisk Haemophilia Foundation supporting more than 30 projects covering 25 countries
| DKK million |
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| World Diabetes Foundation | 69 | 68 | 68 | |||
| Novo Nordisk Haemophilia Foundation | 15 | 15 | 10 | |||
|
|
|
|
|
|
|
|
| Total | 84 | 83 | 78 | |||
|
|
|
|
|
|
|
|
3 Impact on health
A measure of the company’s contribution to global health is the number of healthcare professionals trained, educated, interacted with or reached through awareness campaigns, and the number of people with diabetes reached through training or awareness programmes. The aim is to continue activities to educate healthcare professionals to improve diagnosis and treatment and to train people with diabetes to improve self-care.
Since 2002, 1,178,000 healthcare professionals have been trained, educated, interacted with or reached through awareness campaigns. The number of people with diabetes trained was 494,000 in 2010 compared to 416,000 in 2009, which is an increase of 19% due to more activities.
Through the company’s differential pricing policy, the world’s 49 least developed countries (LDCs) are offered insulin at or below a price of 20% of the average prices for insulin in the western world. The western world is defined as Europe (EU, Switzerland and Norway), the US, Canada and Japan.
The differential pricing policy is part of the global initiatives to promote access to health to all LDCs as defined by the UN. In 2010 Novo Nordisk offered the differential price to all of the 49 LDCs, of which Novo Nordisk operates in 34 countries and sold insulin to either governments or the private market in 67% (33 countries) of the countries according to the differential pricing policy compared to 73% (36 countries) of the countries in 2009. In 2010, Novo Nordisk operated in the Lao People’s Democratic Republic but did not sell insulin at the dif ferential policy price. The government in Lao was offered to buy insulin at the differential price. The insulin sold in 2010 in Lao was to the private market.
In a total of 15 LDCs Novo Nordisk had no sales in 2010 for various reasons. In several cases, either the government has not responded to the offer, there are no private wholesalers or other partners to work with, or wars or political unrest make 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.
96 Novo Nordisk Annual Report 2010
|
Supplementary
information – Notes – Consolidated non-financial statement
|
Consolidated non-financial statement |
4 Patent families
The number of Novo Nordisk patent families decreased by 10% from 905 in 2009 to 817 in 2010. The decrease is a result of a focused patent policy according to which only patents of significant business interest are continued. The number of new patent families established in 2010 was 62, which is an increase of 13% compared to the filing activity of 2009, when 55 new patent families were established. The increased filing activity is attributed to the continued increase in research and development spend.
The patent expiry dates for the product portfolio are shown in the table below. The dates provided are for expiry of patents in the US, Japan, China and major European markets 1) on the active ingredient, unless otherwise indicated, and include extensions of patent term (including for paediatric extension where applicable). In many cases Novo Nordisk has exclusivity beyond the expiry of the active ingredient patent through later-expiring patents. 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)
|
Product
|
Europe
|
US
|
Japan
|
China
|
||||
|
|
|
|
|
|
|
|
|
|
| Levemir® |
2018
|
2019
|
2019
|
2014
|
||||
| NovoRapid® (NovoLog®) |
2011
|
2) |
2014
|
2) |
Expired
|
2) |
Expired
|
2) |
| NovoMix® 30 (NovoLog® Mix 70/30) |
2014–15
|
3) |
2014
|
2014
|
Expired
|
|||
| NovoNorm® (Prandin®) |
Expired
|
6) |
Expired
|
2011
|
7) |
Expired
|
||
| PrandiMet® |
Pending
|
2018
|
5) |
Pending
|
N/A
|
|||
| Norditropin® (Norditropin® SimpleXx®) |
2017
|
4) |
2015
|
4) |
2017
|
4) |
2017
|
4) |
| NovoSeven® |
2010–11
|
3) |
Expired
|
Expired
|
Expired
|
|||
| Victoza® |
2022
|
2022
|
2022
|
2017
|
||||
|
|
|
|
|
|
|
|
|
|
1) Major European markets are defined as Germany, France and the UK.
2) Formulation patent expires in 2017.
3) Exact date varies from country to country.
4) Formulation patent.
5) Combination patent.
6) Enantiomer use patent expires in 2011, extended to 2013 in certain countries.
7) Possibly extendable by five years.
5 Animals purchased
Novo Nordisk continuously works towards reducing, refining and replacing experiments on animals and to improve animal welfare. The number of animals purchased in 2010 increased by 10% compared to 2009 and 96% of animals purchased in 2010 were rodents. The increase in rodents is due to increases in the number of biopharmaceutical studies, where rodents are most suitable. The increase in purchased dogs is due to an increased number of diabetes studies in this species.
|
Number
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Mice and rats |
60,441
|
54,714 | 54,484 | |||
| Guinea pigs |
74
|
84 | 150 | |||
| Hamsters |
12
|
6 | 16 | |||
| Rabbits |
543
|
559 | 770 | |||
| Pigs |
1,196
|
1,170 | 808 | |||
| Dogs |
328
|
240 | 276 | |||
| Goats |
1
|
2 | 6 | |||
| Non-human primates |
330
|
540 | 593 | |||
| Other vertebrates 1) |
2
|
0 | 150 | |||
|
|
|
|
|
|
|
|
| Total |
62,927
|
57,315 | 57,253 | |||
|
|
|
|
|
|
|
|
1) Other vertebrates are lamas, fish, chickens and frogs.
6 People participating in clinical trials
The number of people participating in clinical interventional trials increased by 74% from 11,130 in 2009 to 19,361 in 2010. The substantial increase was due to the initiation of the phase 3a programme on Degludec 1) (insulin degludec) and DegludecPlus 2) (insulin degludec/insulin aspart).
1) Internal designation for insulin degludec
2) Internal designation for insulin degludec/insulin aspart
7 Employees
|
Number
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Employees by gender | ||||||
| – Female |
15,100
|
14,514
|
13,432
|
|||
| – Male |
15,383
|
14,815
|
13,636
|
|||
|
|
|
|
|
|
|
|
| Total number of employees |
30,483
|
29,329
|
27,068
|
|||
|
|
|
|
|
|
|
|
| Year-end number of full-time | ||||||
| equivalents (FTEs) |
30,014
|
28,809
|
26,575
|
|||
|
|
|
|
|
|
|
|
In 2010 the number of employees increased by 1,154 (4%) compared to an increase of 2,261 (8%) in 2009. The increase reflects increased activities in most business areas, particularly Operations and Research and Development. Regionally, the largest increase in employees was in North America and International Operations.
The rate of employee turnover increased from 8.3 in 2009 to 9.1 in 2010. The increase was primarily in International Operations and is deemed acceptable. Overall the increase can be attributed to the gradual recovery of the global economy.
The annual training costs per employee increased by 7%, with a spend of DKK 14,207 in 2010 compared to DKK 13,283 in 2009, reflecting the company’s strategic prioritisation of talent and leadership development, and of lifelong learning offered to all employees.
Diversity in the company’s senior management teams increased from 50% (14 teams) of the 28 teams in 2009 to 54% (15 teams) in 2010.
In the annual eVoice survey measuring employee engagement, the response rate was 92%. The engagement rate remained high at 4.3 in 2010 as in 2009. Below are additional key questions and scores from the eVoice survey that reconfirm the strong adherence to the company’s values and priorities.
Living our values
|
Scale
1–5
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Importance of social and environmental issues for the future of the company | 4.5 | 4.5 | 4.5 | |||
| Manager’s behaviour consistent with Novo Nordisk’s values | 4.4 | 4.4 | 4.3 | |||
|
|
|
|
|
|
|
Novo Nordisk Annual Report 2010 97
|
Supplementary
information – Notes – Consolidated non-financial statement
|
Consolidated non-financial statement |
8 Health and safety
In 2010, there were no fatal occupational injuries and Novo Nordisk has not had any fatal occupational injuries since 2004.
The rate of absence decreased in 2010 to 2.4% from 2.6% in 2009. The decrease is explained by fewer days of absence due to illness compared to 2009. The frequency of occupational injuries increased from 4.3 in 2009 to 4.9 in 2010. The increase is due to more occupational injuries with absence both at production sites and in affiliates.
By the end of 2010, the Novo Nordisk Occupational Health & Safety (OH&S) Management System globally covered research and development, production facilities and headquarters.
9 Socio-economics
In 2010, Novo Nordisk created 1,154 new positions globally and had 30,014 full-time positions, measured as full-time equivalents (FTEs). This compares to 2,261 new positions created in 2009 with 28,809 FTEs. The number of jobs in 2010 translates into 108,248 direct and indirect jobs. Of these, 78,218 indirect global jobs are created in the supply chain from production needs and employees’ private consumption. The majority of indirect jobs created are due to production (54,648), but the effect of private consumption by Novo Nordisk employees is also significant (23,570). In 2009, the total number of direct and indirect jobs created was 96,468.
| Cash value distribution |
DKK
million |
Cash
received
|
Cash
added
value |
||||
|
|
|
|
|
|
|
|
|
| 2010 | |||||||
| Customers | Cash received from products and services (from sales) |
59,339
|
100%
|
||||
| Suppliers | Cash payments for materials, facilities and services 1) |
22,781
|
38%
|
||||
|
|
|
|
|
|
|
|
|
| Company cash | Cash added value (cash received minus cash payments) |
36,558
|
100%
|
||||
| Employees | Remuneration |
18,522
|
31%
|
51%
|
|||
| Investors/funders | Dividend, share repurchase and interest payments |
13,720
|
23%
|
38%
|
|||
| Public sector | Taxes |
3,436
|
6%
|
9%
|
|||
| Management | Future growth |
880
|
2%
|
2%
|
|||
|
|
|
|
|
|
|
|
|
| 2009 | |||||||
| Customers | Cash received from products and services (from sales) |
50,596
|
100%
|
||||
| Suppliers | Cash payments for materials, facilities and services 1) |
20,386
|
40%
|
||||
|
|
|
|
|
|
|
|
|
| Company cash | Cash added value (cash received minus cash payments) |
30,210
|
100%
|
||||
| Employees | Remuneration |
15,496
|
31%
|
51%
|
|||
| Investors/funders | Dividend, share repurchase and interest payments |
10,429
|
21%
|
34%
|
|||
| Public sector | Taxes |
1,998
|
4%
|
7%
|
|||
| Management | Future growth |
2,287
|
4%
|
8%
|
|||
|
|
|
|
|
|
|
|
|
| 2008 | |||||||
| Customers | Cash received from products and services (from sales) |
45,064
|
100%
|
||||
| Suppliers | Cash payments for materials, facilities and services 1) |
16,151
|
36%
|
||||
|
|
|
|
|
|
|
|
|
| Company cash | Cash added value (cash received minus cash payments) |
28,913
|
100%
|
||||
| Employees | Remuneration |
14,141
|
31%
|
49%
|
|||
| Investors/funders | Dividend, share repurchase and interest payments |
7,617
|
17%
|
26%
|
|||
| Public sector | Taxes |
3,172
|
7%
|
11%
|
|||
| Management | Future growth |
3,983
|
9%
|
14%
|
|||
|
|
|
|
|
|
|
|
|
1) Fixed assets and cash payments outside Novo Nordisk. The figure includes cash received from licence fees, realised exchange rate gains and interest income.
10 Company reputation
Company reputation, measured as the mean brand score, remained stable with a small decrease of 0.2 points from 76.3 in 2009 to 76.1 (on a scale of 0–100) in 2010.
11 Business ethics training
In 2010, 98% of all employees were trained in business ethics upon the release of the updated Standard Operating Procedures. The scope of the business ethics training includes all employees present in Novo Nordisk by the time of the new releases. The training is conducted annually. This disclosure is reported for the first time this year, hence no historical data exists.
12 Quality
In 2010, as in 2009, no warning letters were issued to Novo Nordisk by the FDA in connection with GMP (Good Manufacturing Practice), GCP (Good Clinical Practice) or GLP (Good Laboratory Practice) inspections. Nor were any re-inspections issued to Novo Nordisk. In total, 105 inspections were concluded in 2010, which is an increase of 36% compared to 2009, when 77 inspections were concluded. The increase is attributed to an increased number of GMP and GCP inspections. More GMP inspections were conducted, partly due to increased activities by the Danish Medicines Agency to overcome a backlog situation and partly due to a more diverse supply strategy. GCP inspections increased due to changes in reporting.
98 Novo Nordisk Annual Report 2010
|
Supplementary
information – Notes – Consolidated non-financial statement
|
Consolidated non-financial statement |
13 Fulfilment of action points from facilitations of the Novo Nordisk Way of Management
In 2010, 93% of all action points, based on a three-year average, were closed in a timely manner, which is consistent with 2009.
14 Supplier audits
In 2010, a total of 192 audits were conducted among suppliers, compared to 196 in 2009. Audits are categorised as either ‘Responsible sourcing audits’ or ‘Quality sourcing audits’.
|
Number
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Responsible sourcing audits |
26
|
20
|
31
|
|||
| Quality sourcing audits |
166
|
176
|
130
|
|||
|
|
|
|
|
|
|
|
| Total number of audits |
192
|
196
|
161
|
|||
|
|
|
|
|
|
|
The supplier audits in 2010 resulted in 539 non-conformities and follow-up actions were performed according to procedures.
15 Energy
In 2010, the consumption of energy was 2,234,000 GJ, which is a small decrease (0.5%) compared to 2,246,000 GJ in 2009. Reductions at the production sites outweigh increases in other areas, such as the research and development site in Denmark.
16 Water
The consumption of water decreased by 5% from 2,149,000 m3 in 2009 to 2,047,000 m3 in 2010. The decrease was mainly due to water saving efforts in diabetes care production.
17 Raw materials and packaging materials
The consumption of raw materials decreased by 18% from 79,000 tons in 2009 to 65,000 tons in 2010. The decrease was mainly due to optimisations in insulin bulk production in Kalundborg.
18 CO2 emissions
|
In
1,000 tons
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
|
CO2
emissions
from energy consumption
|
95
|
146
|
215
|
|||
| CO2 emissions from refrigerants |
6
|
6
|
N/A
|
|||
| CO2 emissions from transport |
57
|
N/A
|
N/A
|
|||
|
|
|
|
|
|
|
|
| Total CO2 emissions |
158
|
|||||
|
|
|
|
|
|
|
The CO2 emissions from energy consumption related to production decreased by 35% from 146,000 tons in 2009 to 95,000 tons in 2010, mainly due to the agreement with DONG Energy on receiving certificates from the offshore wind turbine park Horns Rev 2 in Denmark, which started operating in 2009. In 2010, the wind turbines were in production the whole year.
The CO2 emissions from refrigerants remained stable at 6,000 tons in 2010 as in 2009. Novo Nordisk continues focusing on eliminating refrigerants with a high CO2 potential and continuing to improve good operations and maintenance practice for the cooling systems.
The CO2 emissions from transport in relation to distribution of products are reported for the first time this year, hence no historical data exists.
19 Wastewater
The total volume of wastewater decreased by 6% from 2,062,000 m3 in 2009 to 1,935,000 m3 in 2010, primarily due to changes in the diabetes care production. In the same period, the discharged quantity of COD decreased by 10% from 617 tons in 2009 to 555 tons in 2010.
20 Waste
In 2010, the total amount of waste decreased by 2% from 21,019 tons in 2009 to 20,565 tons in 2010. This was due to a 12% decrease in the quantity of hazardous waste. The volume of non-hazardous waste was 68% of total waste, representing an increase of 4%, whereas the recycling percentage of total waste remained stable compared to 2009.
|
Tons
|
2010
|
2009
|
2008
|
|||
|
|
|
|
|
|
|
|
| Non-hazardous waste |
13,911
|
13,432
|
14,240
|
|||
|
|
|
|
|
|
|
|
| – Recycled (%) |
53
|
57
|
57
|
|||
| – Incinerated (%) 1) |
20
|
21
|
20
|
|||
| – Landfill (%) |
7
|
5
|
6
|
|||
| – Special treatment (%) |
20
|
17
|
17
|
|||
| Hazardous waste |
6,654
|
7,587
|
6,106
|
|||
| – Recycled ethanol (%) 2) |
44
|
40
|
38
|
|||
| – Incinerated ethanol (%) 3) |
15
|
21
|
19
|
|||
| – Other (%) |
41
|
39
|
43
|
|||
|
|
|
|
|
|
|
|
| Total waste |
20,565
|
21,019
|
20,346
|
|||
|
|
|
|
|
|
|
|
| Recycling percentage of total waste |
50
|
51
|
51
|
|||
|
|
|
|
|
|
|
| 1) | 99% with energy recovery. |
|
2) |
Ethanol recycled in eg biogas or wastewater treatment plants. |
| 3) |
Incinerated at combined heat and power plants or at plants for special treatment of hazardous waste with energy recovery. |
21 Breaches
of regulatory limit values
Ensuring compliance with legal environmental requirements is a high priority for Novo Nordisk. The number of breaches of regulatory limit values increased from 10 in 2009 to 18 in 2010, an increase of 80% due to different types of breaches eg noise, smell and wastewater components.
Novo Nordisk Annual Report 2010 99
|
Supplementary
information– Five years comparative figures
|
Summary of financial data 2006-2010 in EUR (unaudited) |
Summary of financial data 2006 –2010 in EUR
|
EUR
million
|
2006
|
2007
|
2008
|
2009
|
2010
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
5,194
|
5,614
|
6,109
|
6,860
|
8,161
|
|||||
|
Sales
by business segment:
|
||||||||||
|
Modern
insulins (insulin analogues)
|
1,451
|
1,880
|
2,323
|
2,883
|
3,572
|
|||||
|
Human
insulins
|
1,804
|
1,687
|
1,583
|
1,520
|
1,588
|
|||||
|
Victoza®
|
–
|
–
|
–
|
12
|
311
|
|||||
|
Protein-related
products
|
215
|
235
|
247
|
265
|
297
|
|||||
|
Oral
antidiabetic products (OAD)
|
266
|
288
|
321
|
356
|
369
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
3,736
|
4,090
|
4,474
|
5,036
|
6,137
|
|||||
|
NovoSeven®
|
755
|
788
|
858
|
950
|
1,078
|
|||||
|
Norditropin®
|
444
|
471
|
518
|
591
|
645
|
|||||
|
Hormone
replacement therapy
|
215
|
224
|
216
|
234
|
254
|
|||||
|
Other
products
|
44
|
41
|
43
|
49
|
47
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
1,458
|
1,524
|
1,635
|
1,824
|
2,024
|
|||||
|
Sales
by geographical segment:
|
||||||||||
|
North
America
|
1,646
|
1,845
|
2,032
|
2,454
|
3,170
|
|||||
|
Europe
|
2,051
|
2,194
|
2,309
|
2,356
|
2,506
|
|||||
|
International
Operations 1)
|
871
|
979
|
1,130
|
1,393
|
1,725
|
|||||
|
–
of which Region China
|
208
|
271
|
353
|
476
|
606
|
|||||
|
Japan
& Korea 1)
|
626
|
596
|
638
|
657
|
760
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortisation and impairment losses
|
287
|
404
|
328
|
343
|
331
|
|||||
|
Operating
profit
|
1,223
|
1,200
|
1,660
|
2,005
|
2,537
|
|||||
|
Net
financials
|
6
|
272
|
43
|
(126
|
) |
(82
|
) | |||
|
Profit
before income taxes
|
1,229
|
1,472
|
1,703
|
1,879
|
2,455
|
|||||
|
Income
taxes
|
364
|
328
|
409
|
433
|
521
|
|||||
|
Net
profit
|
865
|
1,144
|
1,294
|
1,446
|
1,934
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
5,994
|
6,401
|
6,792
|
7,356
|
8,237
|
|||||
|
Total
current liabilities
|
1,362
|
1,427
|
1,739
|
1,802
|
2,521
|
|||||
|
Total
non-current liabilities
|
592
|
658
|
627
|
752
|
757
|
|||||
|
Equity
|
4,040
|
4,316
|
4,426
|
4,802
|
4,959
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditure
|
374
|
304
|
235
|
353
|
444
|
|||||
|
Free
cash flow 2)
|
631
|
1,210
|
1,478
|
1,656
|
2,284
|
|||||
|
Net
cash flow
|
62
|
220
|
552
|
307
|
118
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| 1) | As of 1 January 2010 Korea joined Japan to form Region Japan & Korea while Australia and New Zealand became part of Region International Operations. Comparatives for 2006–2009 have been restated and are comparable to the 2010 regional set-up. | |
| 2) | For definitions, please refer to p 92. | |
| Key figures are translated into EUR as supplementary information – the translation of Income statement items is based on the average exchange rate in 2010 (EUR 1 = DKK 7.4472) and the translation of Balance sheet items is based on the exchange rate at the end of 2010 (EUR 1 = DKK 7.4544). The figures in DKK reflect the economic substance of the underlying events and circumstances of the Group. | ||
100 Novo Nordisk Annual Report 2010
|
Supplementary
information– Five years comparative figures
|
Quarterly financial figures 2009 and 2010 (unaudited) |
Quarterly financial figures 2009 and 2010
| 2009 | 2010 | |||||||||||||||
|
DKK
million
|
Q1
|
Q2
|
Q3
|
Q4
|
Q1
|
Q2
|
Q3
|
Q4
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
12,498
|
13,001
|
12,517
|
13,062
|
13,674
|
15,394
|
15,584
|
16,124
|
||||||||
|
Sales
by business segment:
|
||||||||||||||||
|
Modern
insulins (insulin analogues)
|
4,990
|
5,414
|
5,353
|
5,714
|
5,862
|
6,792
|
6,820
|
7,127
|
||||||||
|
Human
insulins
|
3,004
|
2,879
|
2,747
|
2,685
|
2,773
|
3,099
|
2,963
|
2,992
|
||||||||
|
Victoza®
|
–
|
–
|
28
|
59
|
370
|
296
|
700
|
951
|
||||||||
|
Protein-related
products
|
484
|
492
|
491
|
510
|
503
|
583
|
567
|
561
|
||||||||
|
Oral
antidiabetic products (OAD)
|
691
|
675
|
650
|
636
|
645
|
704
|
736
|
666
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
9,169
|
9,460
|
9,269
|
9,604
|
10,153
|
11,474
|
11,786
|
12,297
|
||||||||
|
NovoSeven®
|
1,805
|
1,874
|
1,651
|
1,742
|
1,914
|
2,155
|
1,965
|
1,996
|
||||||||
|
Norditropin®
|
1,034
|
1,122
|
1,074
|
1,171
|
1,083
|
1,245
|
1,233
|
1,242
|
||||||||
|
Hormone
replacement therapy
|
409
|
435
|
440
|
460
|
443
|
450
|
517
|
482
|
||||||||
|
Other
products
|
81
|
110
|
83
|
85
|
81
|
70
|
83
|
107
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
3,329
|
3,541
|
3,248
|
3,458
|
3,521
|
3,920
|
3,798
|
3,827
|
||||||||
|
Sales
by geographical segment:
|
||||||||||||||||
|
North
America
|
4,532
|
4,710
|
4,527
|
4,510
|
5,221
|
5,988
|
6,114
|
6,286
|
||||||||
|
Europe
|
4,195
|
4,375
|
4,376
|
4,594
|
4,432
|
4,671
|
4,675
|
4,886
|
||||||||
|
International
Operations 1)
|
2,607
|
2,661
|
2,447
|
2,656
|
2,865
|
3,296
|
3,341
|
3,341
|
||||||||
| – of which Region China |
923
|
854
|
876
|
883
|
1,030
|
1,083
|
1,214
|
1,181
|
||||||||
| Japan & Korea 1) |
1,164
|
1,255
|
1,167
|
1,302
|
1,156
|
1,439
|
1,454
|
1,611
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
9,990
|
10,391
|
9,832
|
10,427
|
10,984
|
12,425
|
12,648
|
13,039
|
||||||||
| Sales and distribution costs |
3,844
|
3,837
|
3,502
|
4,237
|
3,984
|
4,364
|
4,573
|
5,274
|
||||||||
| Research and development costs |
1,744
|
1,849
|
1,884
|
2,387
|
2,131
|
2,434
|
2,302
|
2,735
|
||||||||
| Administrative expenses |
679
|
693
|
666
|
726
|
711
|
745
|
759
|
850
|
||||||||
| Licence fees and other operating income (net) |
87
|
78
|
34
|
142
|
224
|
159
|
110
|
164
|
||||||||
| Operating profit |
3,810
|
4,090
|
3,814
|
3,219
|
4,382
|
5,041
|
5,124
|
4,344
|
||||||||
| Net financials |
(305
|
) |
(206
|
) |
(207
|
) |
(227
|
) |
(65
|
) |
(433
|
) |
(468
|
) |
361
|
|
| Profit before income taxes |
3,505
|
3,884
|
3,607
|
2,992
|
4,317
|
4,608
|
4,656
|
4,705
|
||||||||
| Income taxes |
806
|
893
|
852
|
669
|
993
|
1,060
|
1,071
|
759
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net profit |
2,699
|
2,991
|
2,755
|
2,323
|
3,324
|
3,548
|
3,585
|
3,946
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation, amortisation and impairment losses |
607
|
533
|
657
|
754
|
581
|
595
|
607
|
684
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
50,205
|
51,246
|
52,589
|
54,742
|
54,155
|
57,048
|
57,162
|
61,402
|
||||||||
| Total equity |
31,345
|
34,086
|
34,874
|
35,734
|
32,916
|
33,635
|
34,264
|
36,965
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financial ratios | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| In percentage of sales | ||||||||||||||||
| Sales and distribution costs |
30.8%
|
29.5%
|
28.0%
|
32.4%
|
29.1%
|
28.3%
|
29.3%
|
32.7%
|
||||||||
| Research and development costs |
14.0%
|
14.2%
|
15.1%
|
18.3%
|
15.6%
|
15.8%
|
14.8%
|
17.0%
|
||||||||
| Administrative expenses |
5.4%
|
5.3%
|
5.3%
|
5.6%
|
5.2%
|
4.8%
|
4.9%
|
5.3%
|
||||||||
| Gross margin 2) |
79.9%
|
79.9%
|
78.5%
|
79.8%
|
80.3%
|
80.7%
|
81.2%
|
80.9%
|
||||||||
| Operating profit margin 2) |
30.5%
|
31.5%
|
30.5%
|
24.6%
|
32.0%
|
32.7%
|
32.9%
|
26.9%
|
||||||||
| Equity ratio 2) |
62.4%
|
66.5%
|
66.3%
|
65.3%
|
60.8%
|
59.0%
|
59.9%
|
60.2%
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share ratios | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per share/ADR (in DKK) |
4.44
|
4.96
|
4.62
|
3.95
|
5.66
|
6.07
|
6.21
|
6.87
|
||||||||
| Diluted earnings per share/ADR (in DKK) |
4.41
|
4.91
|
4.58
|
3.92
|
5.61
|
6.02
|
6.15
|
6.82
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average number of shares outstanding (million) – basic |
607.4
|
603.1
|
596.4
|
589.9
|
587.6
|
584.0
|
577.6
|
572.7
|
||||||||
| Average number of shares outstanding (million) – diluted |
612.7
|
607.9
|
601.4
|
595.2
|
593.0
|
588.9
|
582.3
|
577.5
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Employees | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of full-time employees at the end of the period |
27,429
|
27,998
|
28,497
|
28,809
|
29,154
|
29,364
|
29,515
|
30,014
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1) | As of 1 January 2010 Korea joined Japan to form Region Japan & Korea while Australia and New Zealand became part of Region International Operations. Comparatives for Q1–Q4 2009 have been restated and are comparable to the 2010 regional set-up. | |
| 2) | For definitions, please refer to p 92. |
Novo Nordisk Annual Report 2010 101
| Financial statements of the Parent company |
 |
||||
|
statements
of the Parent company for 2010 |
||||
|
103
|
Income statement | |||
|
104
|
Balance sheet | |||
|
105
|
Notes to the financial statements | |||
102 Novo Nordisk Annual Report 2010
|
Income
statement for the year ended 31 December
|
Financial statements of the Parent company |
Income statement for the year ended 31 December
|
DKK
million
|
Note
|
2010
|
2009
|
|||
|
|
|
|
|
|
|
|
|
|
||||||
| Sales |
2
|
37,261
|
27,834
|
|||
| Cost of goods sold |
3
|
11,609
|
9,155
|
|||
|
|
|
|
|
|
|
|
| Gross profit |
25,652
|
18,679
|
||||
|
|
||||||
| Sales and distribution costs |
3
|
10,196
|
6,932
|
|||
| Research and development costs |
3
|
7,998
|
6,739
|
|||
| Administrative expenses |
3,
4
|
1,385
|
1,229
|
|||
| Licence fees and other operating income (net) |
691
|
433
|
||||
|
|
|
|
|
|
|
|
| Operating profit |
6,764
|
4,212
|
||||
|
|
||||||
| Profit in subsidiaries, net of tax |
10
|
9,475
|
8,170
|
|||
| Share of profit in associated companies, net of tax |
10
|
1,089
|
(55
|
)
|
||
| Financial income |
5
|
437
|
381
|
|||
| Financial expenses |
5
|
1,884
|
1,087
|
|||
|
|
|
|
|
|
|
|
| Profit before income taxes |
15,881
|
11,621
|
||||
|
|
||||||
|
Income
taxes
|
6
|
1,466
|
857
|
|||
|
|
|
|
|
|
|
|
|
Net
profit for the year
|
14,415
|
10,764
|
||||
|
|
|
|
|
|
|
|
|
|
||||||
| Proposed appropriation of net profit: |
|
|||||
| Dividends |
5,700
|
4,400
|
||||
| Net revaluation reserve according to the equity method |
9,
10
|
1,573
|
5,751
|
|||
| Retained earnings |
7,142
|
613
|
||||
|
|
|
|
|
|
|
|
|
14,415
|
10,764
|
|||||
|
|
|
|
|
|
|
Novo Nordisk Annual Report 2010 103
|
Balance
sheet at 31 December
|
Financial statements of the Parent company |
Balance sheet at 31 December
|
DKK
million
|
Note
|
2010
|
2009
|
|||
|
|
|
|
|
|
|
|
| Assets | ||||||
| Intangible assets | 7 | 1,083 | 781 | |||
| Property, plant and equipment | 8 | 14,418 | 14,381 | |||
| Financial assets | 10 | 19,314 | 17,400 | |||
|
|
|
|
|
|
|
|
| Total non-current assets | 34,815 | 32,562 | ||||
|
|
|
|
|
|
|
|
| Raw materials and consumables | 1,231 | 1,100 | ||||
| Work in progress | 4,896 | 6,509 | ||||
| Finished goods | 1,551 | 1,492 | ||||
|
|
|
|
|
|
|
|
| Inventories | 7,678 | 9,101 | ||||
|
|
|
|
|
|
|
|
| Trade receivables | 1,388 | 1,081 | ||||
| Amounts owed by affiliates | 6,748 | 3,889 | ||||
| Tax receivables | 518 | 464 | ||||
| Other receivables | 879 | 623 | ||||
|
|
|
|
|
|
|
|
| Receivables | 9,533 | 6,057 | ||||
|
|
|
|
|
|
|
|
| Marketable securities and financial instruments | 3,980 | 1,528 | ||||
| Cash at bank and in hand | 11,418 | 10,625 | ||||
|
|
|
|
|
|
|
|
| Total current assets | 32,609 | 27,311 | ||||
|
|
|
|
|
|
|
|
| Total assets | 67,424 | 59,873 | ||||
|
|
|
|
|
|
|
|
| Equity and liabilities | ||||||
| Share capital | 600 | 620 | ||||
| Net revaluation reserve according to the equity method | 9,791 | 22,415 | ||||
| Retained earnings | 26,565 | 12,670 | ||||
|
|
|
|
|
|
|
|
| Total equity | 9 | 36,956 | 35,705 | |||
|
|
|
|
|
|
|
|
| Deferred income tax liabilities | 12 | 204 | 880 | |||
| Other provisions | 13 | 561 | 566 | |||
|
|
|
|
|
|
|
|
| Total provisions | 765 | 1,446 | ||||
|
|
|
|
|
|
|
|
| Mortgage debt | 504 | 503 | ||||
| Other non-current debt | – | 467 | ||||
|
|
|
|
|
|
|
|
| Non-current liabilities | 11 | 504 | 970 | |||
|
|
|
|
|
|
|
|
| Current debt and financial instruments | 1,669 | 306 | ||||
| Trade payables | 1,479 | 1,188 | ||||
| Amounts owed to affiliates | 23,186 | 17,454 | ||||
| Tax payables | – | 1 | ||||
| Other current liabilities | 2,865 | 2,803 | ||||
|
|
|
|
|
|
|
|
| Current liabilities | 29,199 | 21,752 | ||||
|
|
|
|
|
|
|
|
| Total liabilities | 29,703 | 22,722 | ||||
|
|
|
|
|
|
|
|
| Total equity and liabilities | 67,424 | 59,873 | ||||
|
|
|
|
|
|
|
|
104 Novo Nordisk Annual Report 2010
|
Notes
– Financial statements
|
Financial statements of the Parent company |
Notes to the financial statements
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 compared to 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 note 1 Basis of preparation of the consolidated financial statements, pp 62–66.
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 and associated companies is transferred to net revaluation reserve according to the equity method under equity.
Fair value adjustments of financial assets categorised as ‘Available for sale’ are recognised in the Parent company in the Income statement.
The profits in subsidiaries and associated companies 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 companies.
Cash
flow statement
No separate
cash flow statement has been prepared for the Parent company – please
refer to the Consolidated statement of cash flow on p 60.
2 Sales
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
|
Sales
by business segment 1)
|
||||
|
Diabetes
care total
|
36,943
|
27,513
|
||
|
Biopharmaceuticals
total
|
318
|
321
|
||
|
|
|
|
|
|
|
Total
sales
|
37,261
|
27,834
|
||
|
|
|
|
|
|
|
Sales
by geographical segment 1)
|
||||
|
Europe
|
12,134
|
10,603
|
||
|
North
America
|
13,373
|
7,013
|
||
|
International
Operations
|
8,892
|
6,917
|
||
|
–
of which Region China
|
3,191
|
2,590
|
||
|
Japan
& Korea
|
2,862
|
3,301
|
||
|
|
|
|
|
|
|
Total
sales
|
37,261
|
27,834
|
||
|
|
|
|
|
|
Sales are attributed to geographical segment based on location of the customer.
|
1) |
For definitions of the segments, please refer to the Consolidated financial statements, note 2, pp 67–68. |
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Wages and salaries | 5,730 | 6,106 | ||
| Share-based payment costs | 637 | 121 | ||
| Pensions | 576 | 541 | ||
| Other contributions to social security | 155 | 144 | ||
| Other employee costs | 250 | 275 | ||
|
|
|
|
|
|
| Total employee costs | 7,348 | 7,187 | ||
|
|
|
|
|
|
| Included in the Balance sheet as change | ||||
| in employee costs included in inventories | (276) | 90 | ||
|
|
|
|
|
For information regarding remuneration to the Board of Directors and Executive Management, please refer to the ‘Remuneration report’ in section Corporate governance, remuneration and leadership, pp 46– 49 and the Consolidated financial statements note 4, p 69.
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Average number of full-time employees in Novo Nordisk A/S | 11,052 | 10,910 | ||
|
|
|
|
|
4 Fee to statutory auditors
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Statutory audit | 8 | 8 | ||
| Audit-related services | 4 | 1 | ||
| Tax advisory services | 7 | 6 | ||
| Other services | – | 2 | ||
|
|
|
|
|
|
| Total fee to statutory auditors | 19 | 17 | ||
|
|
|
|
|
5 Financial income and financial expenses
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Interest income relating to subsidiaries | 14 | 24 | ||
| Foreign exchange gain (net) | 206 | – | ||
| Other financial income | 217 | 357 | ||
|
|
|
|
|
|
| Total financial income | 437 | 381 | ||
|
|
|
|
|
|
| Interest expenses relating to subsidiaries | 122 | 157 | ||
| Foreign exchange loss (net) | – | 57 | ||
| Other financial expenses | 1,762 | 873 | ||
|
|
|
|
|
|
| Total financial expenses | 1,884 | 1,087 | ||
|
|
|
|
|
|
6 Income taxes
The Parent company paid income taxes of DKK 1,838 million related to the current year (DKK 1,370 million in 2009).
Novo Nordisk Annual Report 2010 105
|
Notes
– Financial statements
|
Financial statements of the Parent company |
7 Intangible assets
| DKK million |
Goodwill
|
Patents
and licences
|
Other
intangible
assets
|
2010
Total
|
2009
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the beginning of the year | 51 | 819 | 461 | 1,331 | 1,033 | |||||
| Additions during the year | 148 | 257 | 405 | 346 | ||||||
| Disposals during the year | (42 | ) | (42 | ) | (48 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 51 | 925 | 718 | 1,694 | 1,331 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Amortisation at the beginning of the year | 51 | 232 | 267 | 550 | 490 | |||||
| Amortisation during the year | 29 | 32 | 61 | 49 | ||||||
| Impairment losses for the year | – | 59 | ||||||||
| Amortisation reversed on disposals during the year | – | (48 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Amortisation at the end of the year | 51 | 261 | 299 | 611 | 550 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | – | 664 | 419 | 1,083 | 781 | |||||
|
|
|
|
|
|
|
|
|
|
|
8 Property, plant and equipment
| DKK million |
Land
and
buildings
|
Plant
and
machinery
|
Other
equipment
|
Payments
on
account
and
assets
in
course of
construction
|
2010
Total
|
2009
Total
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the beginning of the year | 9,689 | 13,811 | 1,770 | 2,036 | 27,306 | 25,761 | ||||||
| Additions during the year | 112 | 317 | 64 | 1,405 | 1,898 | 1,722 | ||||||
| Disposals during the year | (13 | ) | (783 | ) | (47 | ) | (843 | ) | (177 | ) | ||
| Transfer from/(to) other items | 351 | 705 | 46 | (1,102 | ) | 0 | 0 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 10,139 | 14,050 | 1,833 | 2,339 | 28,361 | 27,306 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the beginning of the year | 3,424 | 8,407 | 1,094 | – | 12,925 | 11,249 | ||||||
| Depreciation for the year | 412 | 1,112 | 155 | 1,679 | 1,648 | |||||||
| Impairment losses for the year | 37 | 30 | 1 | 68 | 168 | |||||||
| Depreciation reversed on disposals during the year | (10 | ) | (675 | ) | (44 | ) | (729 | ) | (140 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and impairment losses at the end of the year | 3,863 | 8,874 | 1,206 | – | 13,943 | 12,925 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 6,276 | 5,176 | 627 | 2,339 | 14,418 | 14,381 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Novo Nordisk Annual Report 2010 106
|
Notes
– Financial statements
|
Financial statements of the Parent company |
9 Statement of changes in equity
| DKK million |
Share
capital
|
Net
revaluation
reserve
|
Retained
earnings
|
2010
Total
|
2009
Total
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the beginning of the year |
620
|
22,415 | 12,670 | 35,705 | 32,954 | |||||
| Adjustment to beginning balance 1) | (14,139 | ) | 14,139 | 0 | 0 | |||||
| Appropriated from net profit for the year | 7,142 | 7,142 | 613 | |||||||
| Proposed dividends | 5,700 | 5,700 | 4,400 | |||||||
| Appropriated from net profit for the year to net revaluation reserve | 1,573 | – | 1,573 | 5,751 | ||||||
| Effect of hedged forecast transactions transferred to the Income statement | (422 | ) | (422 | ) | 900 | |||||
| Fair value adjustments for the year on cash flow hedges | (635 | ) | (635 | ) | 352 | |||||
| Dividends paid | (4,400 | ) | (4,400 | ) | (3,650 | ) | ||||
| Share-based payments | 463 | 463 | 259 | |||||||
| Purchase of treasury shares | (9,498 | ) | (9,498 | ) | (6,512 | ) | ||||
| Sale of treasury shares | 678 | 678 | 117 | |||||||
| Reduction of the B share capital |
(20)
|
20 | 0 | 0 | ||||||
| Exchange rate adjustment of investments in subsidiaries | 300 | 300 | 523 | |||||||
| Other adjustments | 350 | 350 | (2 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the end of the year |
600
|
10,149 | 26,207 | 36,956 | 35,705 | |||||
|
|
|
|
|
|
|
|
|
|
|
1) Transfer of unrealised internal profit from previous years from net revaluation reserve to retained earnings.
Regarding average number of shares, please refer to the Consolidated financial statements, note 10, p 70.
Regarding total number of A and B shares in Novo Nordisk A/S and treasury shares, please refer to the Consolidated financial statements, note 18, p 76.
10 Financial assets
| DKK million |
Investments
in
subsidiaries
|
Amounts
owed
by
affiliates
|
Investments
in
associated
companies
|
Other
securities and investments |
2010
Total
|
2009
Total
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the beginning of the year | 8,201 | 73 | 616 | 488 | 9,378 | 9,340 | ||||||
| Investments during the year | 540 | 26 | 38 | 73 | 677 | 53 | ||||||
| Divestments during the year | (11 | ) | (356 | ) | (165 | ) | (532 | ) | (15 | ) | ||
| Transferred from associated companies to Other securities | (164 | ) | 164 | 0 | – | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost at the end of the year | 8,741 | 88 | 134 | 560 | 9,523 | 9,378 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Value adjustments at the beginning of the year | 22,199 | – | (464 | ) | (356 | ) | 21,379 | 15,186 | ||||
| Profit/(loss) before tax | 11,974 | 1,132 | 13,106 | 10,708 | ||||||||
| Income taxes on profit for the year | (2,417 | ) | – | (2,417 | ) | (2,363 | ) | |||||
| Amortisation and impairment of goodwill | (58 | ) | (58 | ) | (3 | ) | ||||||
| Dividends received | (7,895 | ) | (8 | ) | (7,903 | ) | (2,668 | ) | ||||
| Transferred from associated companies to Other securities | 96 | (96 | ) | 0 | – | |||||||
| Divestments during the year | (808 | ) | (808 | ) | – | |||||||
| Effect of currency translation | 1,030 | 1,030 | 478 | |||||||||
| Other adjustments | (70 | ) | 15 | 94 | 39 | 41 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Value adjustments at the end of the year | 24,821 | – | (95 | ) | (358 | ) | 24,368 | 21,379 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Offset against amounts owed by subsidiaries | ||||||||||||
| at the beginning of the year | 102 | 102 | 61 | |||||||||
| Additions during the year | (102 | ) | (102 | ) | 41 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At the end of the year | 0 | – | – | – | 0 | 102 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealised internal profit at the beginning of the year | (13,459 | ) | (13,459 | ) | (13,274 | ) | ||||||
| Change for the year – charged to Income statement | (82 | ) | (82 | ) | (230 | ) | ||||||
| Change for the year – charged to Other comprehensive income | (348 | ) | (348 | ) | – | |||||||
| Effect of currency translation | (688 | ) | (688 | ) | 45 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At the end of the year | (14,577 | ) | – | – | – | (14,577 | ) | (13,459 | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying amount at the end of the year | 18,985 | 88 | 39 | 202 | 19,314 | 17,400 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of investments in subsidiaries and associated companies does not include capitalised goodwill at the end of the year (DKK 58 million included in associated companies in 2009).
A list of companies in the Novo Nordisk Group is included in the Consolidated financial statements, note 33, pp 90–91.
Novo Nordisk Annual Report 2010 107
|
Notes
– Financial statements
|
Financial statements of the Parent company |
11 Non-current liabilities
Non-current liabilities due after more than five years from the balance sheet date amounts to DKK 359 million (DKK 407 million in 2009).
12 Deferred income tax liabilities
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| The deferred tax assets/liabilities are | ||||
| allocated to the various balance sheet | ||||
| items as follows: | ||||
| Property, plant and equipment | 1,233 | 1,217 | ||
| Indirect production costs | 956 | 1,171 | ||
| Unrealised profit on intra-Group sales | (1,780) | (1,587 | ) | |
| Other | (205) | 79 | ||
|
|
|
|
|
|
| Total income tax liabilities | 204 | 880 | ||
|
|
|
|
|
|
The deferred income tax has been calculated using a tax rate of 25%.
For a specification of deferred income tax posted directly in Other comprehensive income, please refer to the Consolidated financial statements, note 9, p 70.
13 Other provisions
| DKK million |
2010
|
2009
|
||
|
|
|
|
|
|
| Non-current | 401 | 149 | ||
| Current | 160 | 417 | ||
|
|
|
|
|
|
| Total other provisions | 561 | 566 | ||
|
|
|
|
|
|
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 statistical product returns.
|
DKK
million
|
2010
|
2009
|
||
|
|
|
|
|
|
| Commitments | ||||
| Lease commitments |
865
|
809
|
||
| Contractual obligations relating to | ||||
| investments in property, plant and equipment |
88
|
260
|
||
| Guarantees given for subsidiaries |
1,601
|
1,346
|
||
| Obligations related to research and development projects |
2,510
|
1,989
|
||
| Other guarantees and commitments |
3,518
|
1,373
|
||
| Lease commitments expiring within the following periods as from the balance sheet date | ||||
| Within one year |
|
|||
| Between one and five years |
402
|
387
|
||
| After five years |
306
|
278
|
||
|
|
|
|
|
|
| Total lease commitments |
865
|
809
|
||
|
|
|
|
|
|
| The lease costs for 2010 and 2009 were | ||||
| DKK 279 million and DKK 250 million, respectively. | ||||
| Security for debt | ||||
| Land, buildings and equipment etc. | ||||
| at carrying amount |
1,277
|
1,196
|
||
|
|
|
|
|
|
For information on pending litigation and other contingencies, please refer to the Consolidated financial statements, note 31, pp 87–88.
15 Related party transactions
For information on transactions with related parties, please refer to the Consolidated financial statements, note 32, p 89.
108 Novo Nordisk Annual Report 2010
|
Management
statement
|
Consolidated financial statements |
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 2010.
The Consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB), and with the 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 2010, the results of the Group and Parent company operations and consolidated cash flows for the financial year 2010. 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 non-financial statement have been prepared in accordance with the non-financial reporting principles of materiality, inclusivity and responsiveness of AA1000APS(2008). They give a balanced and reasonable presentation of the organisation’s economic, environmental and social performance.
We recommend that the Annual Report be adopted at the Annual General Meeting.
Bagsværd, 1 February 2011
Novo Nordisk Annual Report 2010 109
| Independent auditor's report |
110 Novo Nordisk Annual Report 2010
| Independent assurance report |
|
Independent Assurance Report on the non-financial reporting for 2010 To
the Stakeholders of Novo Nordisk A/S The assurance engagement has furthermore covered the nature and extent of Novo Nordisk A/S 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 Management’s
responsibility
Assurance
provider’s responsibility Our team of experts have competences in respect of assurance engagements related to non-financial information. In addition, our team have competences in assessing non-financial information and sustainability management, and thus qualify to conduct this independent assurance engagement. During 2010 we have not performed any tasks or services to Novo Nordisk A/S 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 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 A/S’ adherence to the principles of inclusivity, materiality and responsiveness. |
Methodology,
approach, limitation and scope of work Conclusion Furthermore, nothing has come to our attention causing us to believe that Novo Nordisk A/S does not adhere to the AA1000APS(2008) principles. Observations
and recommendations Regarding
inclusivity We recommend that Novo Nordisk A/S continue to work on ensuring a systematic and structured approach to the AA1000APS(2008) principles at a local level. Regarding
materiality We recommend that the process and criteria applied to assess materiality of non-financial issues is formalised and documented to ensure a consistent process. Regarding
responsiveness With respect to responsiveness we have no comments. Bagsværd, 1 February, 2011 PricewaterhouseCoopers
|
Novo Nordisk Annual Report 2010 111
| Additional information |
In addition to the information reported in this integrated annual report, we report information for specific stakeholder groups at annualreport2010.novonordisk.com. To help you find information, this index is arranged with the categories used online. An explanation of where you can find information reported in accordance with voluntary reporting standards is also included below.
| Topic |
Page(s)
in this report
|
Global
Reporting Initiative Indicator |
UN
Global Compact Principle (P) and Advanced Criteria (C) |
||
|
|
|
|
|
|
|
| Performance | |||||
|
|
|
|
|
|
|
| Triple Bottom Line Performance | 9-10, 15, 21, 93 | C1 | |||
|
|
|
|
|
|
|
| Financial performance | 6–9, 14, 58–61, 100–101 | SO7 | C7 | ||
|
|
|
|
|
|
|
| Social performance | 9–10, 15, 93, 97–99 | C1, C7, C9–12 | |||
|
|
|
|
|
|
|
| Environmental performance | 4, 9–10, 15, 93, 99 | EN1, EN3, EN4, EN8, EN16, EN20–23 | P8, C7, C9–12 | ||
|
|
|
|
|
|
|
| Long-term targets | 12–15 | C7 | |||
|
|
|
|
|
|
|
| Social | |||||
|
|
|
|
|
|
|
| Access to health | 5, 9, 31–32, 38, 96 | EC8 | C3, C5, C6, C9–12 | ||
|
|
|
|
|
|
|
| Safety and quality | 98 | PR1–4 | |||
|
|
|
|
|
|
|
| Support and advocacy | 31–34, 37 | C5, C9–12 | |||
|
|
|
|
|
|
|
| Clinical research | 97 | PR3 | P10 | ||
|
|
|
|
|
|
|
| People | 97 | EC7, LA11–12 | P6 | ||
|
|
|
|
|
|
|
| Diversity | 19–20, 97 | LA13 | |||
|
|
|
|
|
|
|
| Talent and leadership development | 19 | LA12 | P6 | ||
|
|
|
|
|
|
|
| NovoHealth | 34 | LA8 | P6 | ||
|
|
|
|
|
|
|
| Wages and benefits | 46–49, 69 | EC5, LA3–4, LA12 | P3, P6 | ||
|
|
|
|
|
|
|
| Workplace statistics | 97 | ||||
|
|
|
|
|
|
|
| Health and safety | 10, 93, 98 | LA7 | P6 | ||
|
|
|
|
|
|
|
| Business ethics | 10, 19, 98 | SO2–3, PR6–7 | P10, C13–16 | ||
|
|
|
|
|
|
|
| Socioeconomics | 98 | EC1, EC9 | |||
|
|
|
|
|
|
|
| Ethics in research | 39 | ||||
|
|
|
|
|
|
|
| Animal welfare | 97 | ||||
|
|
|
|
|
|
|
| Gene technology | – | ||||
|
|
|
|
|
|
|
| Stem cell research | 18 | ||||
|
|
|
|
|
|
|
| Human rights | 31 | HR1–9, SO5 | P1–6, P10, C3, C9–12 | ||
|
|
|
|
|
|
|
| Supply chain | 10, 44, 93, 99 | EC6, HR1–2 | P1–6, C4, C9–12, C13–16 | ||
|
|
|
|
|
|
|
| Tax contribution | 8, 14, 45, 58–61, 70, 77 | ||||
|
|
|
|
|
|
|
| Donations | 9, 32, 35, 38, 87, 89, 93, 96 | C3 | |||
|
|
|
|
|
|
|
| Employee volunteering | – | ||||
|
|
|
|
|
|
|
| Environmental | |||||
|
|
|
|
|
|
|
| Environmental strategy | 10 | EN13, EN30 | P8 | ||
|
|
|
|
|
|
|
| Limiting our footprint | 10, 99 | ||||
|
|
|
|
|
|
|
| Climate action | 10, 99 | EN5, EN7, EN18 | P8, P9 | ||
|
|
|
|
|
|
|
| Product stewardship | – | EN26 | P7–9 | ||
|
|
|
|
|
|
|
| Governance | |||||
|
|
|
|
|
|
|
| Novo Nordisk Way | 23 | C5, C13–16 | |||
|
|
|
|
|
|
|
| Corporate governance | 40–42 | C2, C6 | |||
|
|
|
|
|
|
|
| Risk management | 43–45 | C1, C4, C7 | |||
|
|
|
|
|
|
|
| Stakeholders & reporting | |||||
|
|
|
|
|
|
|
| Stakeholder engagement | 21, 31–35, 37–38 | ||||
|
|
|
|
|
|
|
| Public affairs | 32–35, 37–38 | SO5–6 | P10, C3 | ||
|
|
|
|
|
|
|
| Partnerships | 21, 32, 34 | ||||
|
|
|
|
|
|
|
| Memberships | – | ||||
|
|
|
|
|
|
|
| Awards and recognition | – | ||||
|
|
|
|
|
|
|
| About our reporting | 62–66, 94–96 | ||||
|
|
|
|
|
|
|
| Integrated reporting | 1, 94 | ||||
|
|
|
|
|
|
|
| Audit and assurance | 42, 110–111 | C8 | |||
|
|
|
|
|
|
|
| Online report archive | – | ||||
|
|
|
|
|
|
|
112 Novo Nordisk Annual Report 2010
| Additional information |
This report makes reference to European product trade names. The list below provides an overview of European trade names with accompanying generic names. Trade and generic names may differ in other markets.
| Therapeutic area |
Trade
name
|
Generic
name
|
|
|
|
|||
| Diabetes care | |||
|
|
|||
| Modern insulins |  |
Levemir®
|
Insulin
detemir
|
|
|
|||
 |
NovoRapid®
|
Insulin
aspart
|
|
|
|
|||
 |
NovoMix®
30
|
Biphasic
insulin aspart
|
|
|
|
|||
 |
NovoMix®
50
|
Biphasic
insulin aspart
|
|
|
|
|||
 |
NovoMix®
70
|
Biphasic
insulin aspart
|
|
|
|
|||
| Glucagon-Like Peptide-1 |  |
Victoza®
|
Liraglutide
|
|
|
|||
| Human insulins |  |
Insulatard®
|
Insulin
human
|
|
|
|||
 |
Actrapid®
|
Insulin
human
|
|
|
|
|||
 |
Mixtard®
30
|
Insulin
human
|
|
|
|
|||
| Diabetes devices |  |
FlexPen®
|
Prefilled
insulin delivery system
|
|
|
|||
 |
NovoPen®
4
|
Durable
insulin delivery system
|
|
|
|
|||
 |
NovoPen
Echo®
|
Durable
insulin delivery system
|
|
|
|
|||
 |
InnoLet®
|
Prefilled
insulin delivery system
|
|
|
|
|||
 |
NovoFine®
|
Needle
|
|
|
|
|||
 |
NovoTwist®
|
Needle
|
|
|
|
|||
 |
GlucaGen®
|
Glucagon
|
|
|
|
|||
| Oral antidiabetic agents |  |
NovoNorm®
|
Repaglinide
|
|
|
|||
 |
PrandiMet®
|
Repaglinide/metformin
|
|
|
|
|||
| Biopharmaceuticals | |||
|
|
|||
| Haemostasis |  |
NovoSeven®
|
Recombinant
factor VIIa
|
|
|
|||
| Human growth hormone |  |
Norditropin®
|
Somatropin
(rDNA origin)
|
|
|
|||
 |
Norditropin®
FlexPro®
|
Prefilled
multidose delivery system
|
|
|
|
|||
 |
NordiFlex™
|
Prefilled
multidose delivery system
|
|
|
|
|||
 |
NordiFlex
PenMate®
|
Automatic
needle insertion accessory
|
|
|
|
|||
 |
NordiPen®
|
Prefilled
multidose delivery system
|
|
|
|
|||
 |
NordiPenMate®
|
Prefilled
multidose delivery system
|
|
|
|
|||
 |
NordiLet®
|
Prefilled
multidose delivery system
|
|
|
|
|||
| Hormone replacement therapy |  |
Activelle®
|
Estradiol/norethisterone
acetate
|
|
|
|||
 |
Estrofem®
|
Estradiol
|
|
|
|
|||
 |
Novofem®
|
Estradiol/norethisterone
acetate
|
|
|
|
|||
 |
Vagifem®
|
Estradiol
hemihydrate
|
|
|
|
|
|
|
Market share data on pp 7 and 26–27 is from IMS Health, IMS MIDAS Customized Insights (November 2010). Market definition for retail: Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Czech, Denmark, Egypt, Estonia, France, Finland, 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, UK and US. Market definition for hospitals: Australia, Bulgaria, Canada, China, Czech, Denmark, Germany, Hungary, Italy, Japan, Latvia, Lithuania, New Zealand, Norway, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, UK and US.
Novo Nordisk Annual Report 2010 113
|
Headquarters Transfer
agents Danske
Bank In
North America: CVR number 24 25 67 90 novonordisk.com
|
Reaching for the stars Liu Hong-yu, a Novo Nordisk scientist with diabetes, has always aimed high. As a child, he dreamed of being an astronaut and flying the 41.5 trillion kilometres to Alpha Centauri, the closest star to our solar system. Now, his aim is to cure chronic conditions. As director of a newly established pilot project, Hong-yu, together with eight colleagues, is responsible for the process optimisation, scale up and production of proteins for preclinical testing. Departments within the research and development centre rely on his team’s work to test hypotheses, validate concepts and discover new targets. Though the search can be frustrating, with nearly nine out of 10 searches ending in failure, Hong-yu remains enthusiastic about finding new options to improve treatment. An annual check-up in 2000 revealed Hong-yu had diabetes, which doctors initially believed was type 2. When oral medications proved ineffective, more blood work was done. The results showed that he had latent autoimmune diabetes in adults, a rare form of diabetes called type 1.5. Hong-yu manages his diabetes with a combination of exercise, diet and insulin. The most difficult change has been reducing his time on the basketball court, a precaution to avoid overexertion, which can impact blood glucose levels. On the cover, Hong-yu is pictured with his son Centauri, named after the star Hong-yu dreamed of reaching as a child.
|
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 14, 2011 |
NOVO NORDISK A/S Lars Rebien Sørensen, President and Chief Executive Officer |