novo nordisk annual report 2012 Diabetes – an emergency in slow motion Strategy Sustainable growth is all about – can it be done? choice Insulin in Novo Nordisk’s performance in 2012 is a result of important decisions made in recent years a tablet – but there is more to the story – why is it so difficult? Contents Accomplishments and results 2012 1 Letter from the Chairman 2 Letter from the CEO 4 Performance highlights 6 2012 performance and 2013 outlook Our business 15 Strategy is all about choice 20 Diabetes – an emergency Diabetes – an emergency in slow motion 20 in slow motion 22 The protein powerhouse 24 Insulin treatment is a balancing act 26 Insulin in a tablet – why is it so difficult? 28 Simple injections 29 Prevent bleedings 30 Pipeline overview 32 Many markets – one model 38 Sustainable growth – can it be done? 41 With every big opportunity comes a risk Governance, leadership and shares 44 Shares and capital structure The protein 46 Corporate governance 22 powerhouse 49 Remuneration 52 Board of Directors 54 Executive Management Financial, social and environmental statements 55 Consolidated financial, social and environmental statements 104 Financial statements of the parent company 109 Management’s statement and Auditor’s reports Additional information 112 More information Simple 28 injections 113 Product overview The Management review, as defined by the Danish Financial Statements Act (FSA), is found on pp 1–54 and 94. This Annual Report is published in both a Danish and an English language version. In the event of any discrepancies, the Danish version shall prevail. 1 Chairman of the Board of Directors Sten Scheibye at the Annual General Meeting in March 2012. Letter from the Chairman 2012 was a very good year for Novo Nordisk. Both in terms of Executive Management with two executives, promoted from financial performance – with reported sales up by 18% and net senior vice president positions within the company. This lifts profit growth of 25% – and progress in the company’s research the direct responsibility for critical functions such as marketing, and development pipeline, which promises well for the future. business development and IT into Executive Management, while And as you will see from this Annual Report – in which we account also broadening the group of senior managers. for both financial, environmental and social performance – the company also did well in many other respects in 2012. In his letter on the following pages, Lars outlines some key events in 2013, and as you will see, it looks like yet another exciting year The company’s Management and all its employees around the for Novo Nordisk. However, I must also remind you that for Novo world can be proud of these results, which are exceptional in Nordisk, as for any company of our size in the pharmaceutical the pharmaceutical world these days when financial constraints industry, there is always the risk of something not going as we and austerity measures are creating an increasingly difficult expected. In the article on p 41, you can read more about key environment for research-based pharmaceutical companies. risks of which you should be aware. We are very aware that Novo Nordisk’s results are created against At the Annual General Meeting on 20 March 2013, the Board a sad background, namely the continuing rise in the number of of Directors will propose a 29% increase in dividend to 18 Danish people with diabetes around the world. And despite advances kroner per share. The Board of Directors has furthermore decided to in healthcare over the years, only a small fraction of the people initiate a new share repurchase programme of up to 14 billion kroner. being treated today are well treated. For me personally, 2012 was the last full year on the Board of As I said in last year’s report: There has never been more need for Directors of which I have been a member since 2003 and had the a company like Novo Nordisk; a company that has dedicated most privilege to chair since 2006. It has been an exciting journey, in the of its resources, skills and innovation power to improving diabetes course of which Novo Nordisk has developed into a leading, global care. And at the same time is making very good use of the skills it and highly respected company. Shareholder return has been high, has built within diabetes in developing its biopharmaceutical business, and the company’s strategic foundation has been strengthened, not the least within haemophilia. making it well prepared to address the challenges ahead. Every year, the Board of Directors reviews the company’s long-term On behalf of the Board of Directors, I would like to express strategy and outlook. As described in the article on p 15, the strategy my appreciation for the leadership shown by Lars and his is characterised by a strong focus on a few diseases, five core Management team and the hard work and dedication of the capabilities and a deeply rooted values-based management system. entire Novo Nordisk organisation. The Board remains confident that these strategic choices provide a solid basis for a continued positive development for Novo Nordisk in the coming years. We are also confident that with Lars Rebien Sørensen and his Executive Management team we have the leadership needed to execute the strategy and fulfil Novo Nordisk’s potential. Together Sten Scheibye with Lars and his team, in January 2013 we decided to expand Chairman of the Board of Directors President and Chief Executive Officer Lars Rebien Sørensen at the European Diabetes Leadership Forum in April 2012. Letter from the CEO In 1923, the first patients were treated with insulin from the best products to customers around the world; on the other hand, company that is now Novo Nordisk. Today, 90 years later, insulin we cannot sell our newest products at the old products’ prices. is still our main product. I think it is worth mentioning for several If we do that, we start to erode the whole innovation model that reasons: it says something about how focused this company has created the products in the first place. Then we deny all the 371 been for many years – and still is. It also shows that insulin and million people who have diabetes the possibility of future, better other protein-based medicines – ‘protein therapeutics’ as they are treatments and, ultimately, a cure for their disease. also called – are fundamentally different from traditional chemical medicines in that our clever researchers can always find ways to In such difficult times, it is crucial that we – industry, politicians make them even better. Finally, my brief history lesson is a reminder and payers – rethink the approach to managing diabetes and to all of us who work in the company today – many of whom are other chronic diseases, ensuring more sustainable healthcare also shareholders in the company – that although we have good solutions. That is why we support initiatives such as the European reason to be proud of what we have achieved with Novo Nordisk Diabetes Leadership Forum, which gathered more than 700 in recent years, we owe a lot to our predecessors, who laid the participants in Copenhagen in April 2012 to discuss and agree foundation for what we are doing today. on ambitions, priorities and actions for improving diabetes care in Europe and OECD countries. Most annual reports these days talk about how the state of the global economy and the ensuing austerity measures put pressure Despite the difficult economic climate, we were able to grow sales on businesses. This report is no exception. We are often facing in 2012 by 12% measured in local currencies due to continued situations where governments are demanding price reductions strong demand for some of our key products. As in 2011, the that we consider unacceptable or implementing measures to products behind most of this growth were our once-daily human limit new products’ access to the market. It puts us in a moral GLP-1 analogue Victoza® (liraglutide) and two of our modern dilemma. On the one hand, we want to continue supplying our insulins, NovoRapid® (NovoLog® in the US) and Levemir®. 3 From a regional perspective, North America was again the main • regulatory filing for IDegLira in the EU mid-2013 and in the contributor to our growth, followed by International Operations US during 2013 pending marketing authorisation of Tresiba® and Region China. As you will see from the article on p 32 about • completion of the phase 3 programme investigating the use our different markets, it is also in these regions we expect to of liraglutide for treatment of people with obesity and co- see most of the growth in the coming years. Our sales growth, morbidities combined with continuous focus on the efficiency of our operations, • initiation of the phase 3 studies for semaglutide, a once-weekly resulted in operating profit growth of 32% reported and 20% in GLP-1 analogue for the treatment of type 2 diabetes; FIAsp; and local currencies. liraglutide for type 1 diabetes as adjunct to insulin. While on the subject of profit, I am aware of the public debate We will invest in both current products and our new-generation on how much or how little large, international companies pay in insulins. We will spend 14–15% of our sales on research and corporate taxes. Therefore, it is important for me to assure you development of new, innovative products, which will address that Novo Nordisk does pay its fair share. In 2012, our tax expense unmet medical needs and help secure Novo Nordisk’s long-term amounted to 6,379 million kroner, corresponding to an effective tax development.