UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
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REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
JANUARY 31 2005
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NOVO NORDISK A/S
(Exact name of Registrant as specified in its charter)
NOVO ALLE
DK-2880, BAGSVAERD
DENMARK
(Address of principal executive offices)
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Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g-32(b):82-_____________________
FINAL RESULTS
FINANCIAL STATEMENT FOR 2004
STOCK EXCHANGE ANNOUNCEMENT NO 3 / 2005
Novo Nordisk's operating profit grew by 9% in 2004
An underlying operating profit growth of 15% expected for 2005
* Sales in 2004 increased by 15% measured in local currencies.
* Sales of insulin analogues increased by 84%
* Sales of NovoSeven(R) increased by 19%
* Sales in North America increased by 32%
* Measured in Danish kroner sales increased by 11%.
* Underlying operating profit increased by more than 20%, and measured in
Danish kroner operating profit increased by 9% to DKK 6,980 million.
* Net profit increased by 4% to DKK 5,013 million and earnings per share
(diluted) increased by 5% to DKK 14.83.
* At the Annual General Meeting on 9 March 2005, the Board of Directors will
propose a 9% increase in dividend to DKK 4.80 per share of DKK 2.
* Lars Rebien Sorensen, president & CEO, said: "We're proud of the results
that we achieved in 2004. The increasing demand for our portfolio of
insulin analogues and NovoSeven(R), coupled with a strong performance in
North America, makes us confident that we will be able to deliver solid
growth also in 2005."
* In 2005, the underlying operating profit is expected to grow by 15% in
local currencies. Measured in Danish kroner the growth in operating profit
is expected to be around 5%, reflecting a significant, negative currency
impact and no major non-recurring income in 2005.
Contents
PAGE
Financial statement 2004 3
Results for 2004 compared to previous expectations 4
Sales development by segments 4
Diabetes care 4
Biopharmaceuticals 6
Costs, licence fees and other operating income 7
Net financials and tax 7
Capital expenditure 7
Free cash flow and financial resources 7
Outlook 2005 8
Research and development update 9
Equity 10
Corporate governance 10
Sustainability issues 11
Legal issues 11
Conference call details 12
Forward-looking statement 12
Financial calendar and contact details 13
APPENDICES:
Appendices 1-3: Income statement, balance sheet and cash flow statement 14
Appendix 4: Statement of changes in equity 17
Appendices 5-6: Quarterly numbers in DKK and EUR 18
Appendix 7: Incentive programmes 20
Appendix 8: Adoption of IFRS 22
Financial statement 2004
As of 1 January 2004, the accounting policies have been changed to comply with
International Financial Reporting Standards (IFRS). Appendix 8 describes the
changes from historically applied Danish GAAP to IFRS. In the fourth quarter of
2004, IFRS 2 'Share-based payment' has been applied retrospectively to all
grants of employee shares and share option schemes from 1997 to 2004. In line
with the development in international practice, cash discounts are now
classified as a deduction from sales. Previously cash discounts were reported as
Sales and distribution costs.
(Amounts below in DKK million except earnings per share, dividend per share and
number of employees)
% CHANGE 2003
PROFIT AND LOSS 2004 2003 2002 2001 2000 TO 2004
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SALES 29,031 26,158 24,866 23,385 20,485 11%
GROSS PROFIT 20,981 18,749 18,268 17,349 15,469 12%
Gross margin 72.3% 71.7% 73.5% 74.2% 75.5%
Sales and distribution costs 8,280 7,451 7,187 6,951 6,013 11%
Percent of sales 28.5% 28.5% 28.9% 29.7% 29.4%
Research and development costs 4,352 4,055 3,952 3,872 3,407 7%
Percent of sales 15.0% 15.5% 15.9% 16.6% 16.6%
Administration costs 1,944 1,857 1,960 1,931 1,917 5%
Percent of sales 6.7% 7.1% 7.9% 8.3% 9.4%
Licence fees and other operating income 575 1,036 758 815 571 (44%)
OPERATING PROFIT 6,980 6,422 5,927 5,410 4,703 9%
Operating margin 24.0% 24.6% 23.8% 23.1% 23.0%
Net financials 477 954 401 285 181 (50%)
PROFIT BEFORE TAX 7,457 7,376 6,328 5,695 4,884 1%
NET PROFIT 5,013 4,833 4,116 3,620 3,154 4%
Net profit margin 17.3% 18.5% 16.6% 15.5% 15.4%
OTHER KEY NUMBERS
Depreciation and amortisation 1,892 1,581 1,293 1,043 1,010 20%
Capital expenditure 2,999 2,273 3,893 3,829 2,123 32%
Free cash flow 4,278 3,846 497 186 2,712 11%
Equity 26,504 24,776 22,477 19,700 16,620 7%
Total assets 37,433 34,564 31,612 28,662 24,597 8%
Equity ratio 70.8% 71.7% 71.1% 68.7% 67.6%
Diluted earnings per share (in DKK) 14.83 14.15 11.85 10.45 9.03 5%
Dividend per share (in DKK) 4.80 4.40 3.60 3.35 2.65 9%
(proposed dividend for 2004)
Average number of full-time employees 19,520 18,381 17,073 14,771 12,698 6%
PERFORMANCE AGAINST LONG-TERM 5 YEARS'
FINANCIAL TARGET RATIOS AVERAGE
Operating profit growth 8.7% 8.4% 9.6% 15.0% 32.6% 14.9%
Operating margin 24.0% 24.6% 23.8% 23.1% 23.0% 23.7%
Return on invested capital 20.6% 19.5% 20.5% 22.7% 22.3% 21.1%
Cash to earnings 85.3% 79.6% 12.1% 5.1% 86.0% 53.6%
RESULTS FOR 2004 COMPARED TO PREVIOUS EXPECTATIONS
The realised performance for 2004 exceeded the expectations communicated with
the financial results for the first nine months of 2004 on 27 October 2004:
* the realised growth in sales of 11% measured in Danish kroner exceeded the
expectation of growth around 10%;
* the 9% growth in reported operating profit exceeded the previously
announced expectations of growth in operating profit of slightly more than
5%; and
* the realised net profit was higher than expected as net financial income
was above expectations, and the effective tax rate was in line with
expectations.
Operating profit for 2004 includes costs of approximately DKK 100 million
related to the implementation of IFRS 2 'Share-based payment', which has also
been adjusted in historical figures.
Sales development by segments
Sales increased by 15% measured in local currencies. Growth was realised both
within diabetes care and biopharmaceuticals - primarily driven by strategically
important products such as the insulin analogues NovoRapid(R) and NovoMix(R) 30
as well as NovoSeven(R).
SALES SHARE OF
2004 GROWTH GROWTH
DKK GROWTH IN LOCAL IN LOCAL
MILLION AS REPORTED CURRENCIES CURRENCIES
THE DIABETES CARE SEGMENT
Insulin analogues 4,507 77% 84% 55%
Human insulin and insulin-related products 14,383 (1%) 2% 7%
Oral antidiabetic products 1,643 15% 21% 8%
DIABETES CARE - TOTAL 20,533 11% 15% 70%
THE BIOPHARMACEUTICALS SEGMENT
NovoSeven(R) 4,359 13% 19% 19%
Growth hormone therapy 2,317 9% 11% 6%
Other products 1,822 7% 11% 5%
BIOPHARMACEUTICALS - TOTAL 8,498 11% 15% 30%
TOTAL SALES 29,031 11% 15% 100%
Sales growth was realised in all regions, with the primary growth driver being
North America, constituting 26% of total sales, but also International
Operations, constituting 17% of total sales, showed solid growth rates.
Diabetes care
Sales of diabetes care products grew by 15% measured in local currencies
compared to 2003 and by 11% measured in Danish kroner to DKK 20,533 million.
Novo Nordisk remains the global market leader in diabetes care (insulin and oral
antidiabetic products) with an overall market share of 20%.
Insulin analogues, human insulin and insulin-related products
Sales of insulin analogues, human insulin and insulin-related products increased
by 14% measured in local currencies and by 11% measured in Danish kroner to DKK
18,890 million. All regions contributed to growth both measured in local
currencies and in Danish kroner.
Novo Nordisk is the global leader in the insulin market with a worldwide insulin
volume market share of 50%, and within the analogue segment Novo Nordisk
continues to gain market share, now holding close to 30% of the world market.
Sales of insulin analogues increased by 84% measured in local currencies and by
77% in Danish kroner to DKK 4,507 million in 2004. Solid growth rates were
realised in all regions, and North America continues to be the primary growth
driver. Sales of insulin analogues contribute with 55% of the overall growth in
local currencies and now constitute 24% of Novo Nordisk's total sales of all
insulin products.
Levemir(R), Novo Nordisk's long-acting insulin analogue, continues to gain
market share in Europe and now holds 9% of the market for long-acting insulin
analogues, less than a year after introduction in the first market. A continued
roll-out of Levemir(R) in additional countries in 2005 is expected to underpin
the solid development seen in the early launch phase.
Europe
Sales in Europe increased by 6% measured in both local currencies and in Danish
kroner, with growth being driven by the portfolio of insulin analogues,
including Levemir(R). Growth in insulin sales continues to be negatively
impacted by price-focused healthcare reforms in some countries, while insulin
sales in Germany in the fourth quarter were positively affected by an
acceleration of purchasing by patients, primarily motivated by reimbursement
considerations.
North America
Sales in North America increased by 34% in local currencies in 2004 and by 22%
measured in Danish kroner. The solid sales growth reflects underlying market
growth and market share gains. The increased market share is driven by a solid
penetration of the insulin analogues NovoLog(R) and NovoLog(R) Mix. Novo Nordisk
now holds more than one-third of the US insulin market and 20% of the analogue
market.
In December, Novo Nordisk's US affiliate Novo Nordisk Inc, was again awarded a
national contract to provide the US Veterans Administration and Department of
Defense (VA/DoD) with human insulin, now also including analogue insulin in both
vials and delivery devices. The new contract is initially for one year with an
option of prolongation for four additional option years, at the discretion of
the VA/DoD. The VA/DoD announced the potential five-year value of the contract
at just under USD 250 million.
International Operations
Sales within International Operations increased by 20% in local currencies and
by 14% measured in Danish kroner. The key growth driver continues to be sales of
human insulin, driven especially by China. However, insulin analogues also
continue to add to growth, driven especially by Turkey, and Novo Nordisk remains
the overall market leader in the analogue segment in the International
Operations region.
Japan & Oceania
Sales in Japan & Oceania increased by 11% in local currencies and by 9% measured
in Danish kroner. Growth is primarily due to increased sales of NovoRapid(R) and
NovoRapid(R) Mix 30, supported by a continued conversion from durable to
prefilled devices, with NOVO Nordisk now holding more than 80% of the prefilled
device market.
Oral antidiabetic products
Sales of oral antidiabetic products increased in all regions and in total by 21%
measured in local currencies and 15% measured in Danish kroner to DKK 1,643
million, with growth primarily driven by North America but also by International
Operations.
Biopharmaceuticals
Sales of biopharmaceutical products increased by 15% in local currencies
compared to 2003 and by 11% measured in Danish kroner to DKK 8,498 million.
NovoSeven(R)
Sales of NovoSeven(R) increased by 19% in local currencies compared to 2003.
Measured in Danish kroner sales increased by 13% to DKK 4,359 million, with all
regions contributing to growth, but with North America, Europe and International
Operations as the major growth drivers. In the fourth quarter, sales were
positively affected by a timing-related increase in sales to a number of
countries in International Operations.
The sales growth of NovoSeven(R) was driven by several factors in 2004. Due to
the high penetration within spontaneous bleeds in congenital inhibitor patients,
the predominant part of the growth within the inhibitor segment has been
generated by treatment of acquired haemophilia patients and usage of
NovoSeven(R) in connection with elective surgery. Furthermore, the marketing
approval in Europe in the first quarter of 2004 of NovoSeven(R) for the control
of bleeding in patients with factor VII deficiency and Glanzmann's
thrombasthenia added to growth. Treatment of spontaneous bleeds for congenital
inhibitor patients remains the largest area of use. In addition, sales are
perceived to have been positively affected by increased investigational use of
NovoSeven(R) influenced by data froM clinical trials from the NovoSeven(R)
expansion programme.
Growth hormone therapy (Norditropin(R) and Norditropin(R) SimpleXx(R))
In local currencies sales of Norditropin(R) and Norditropin(R) SimpleXx(R)
products increased by 11% compared to 2003. Measured in DanISH kroner sales
increased by 9% to DKK 2,317 million and were driven by Europe and North
America. The prefilled delivery device NordiFlex(R) was launched in Japan and
selected European countries during 2004 as well as in the US market in January
2005.
In Japan, the launch of NordiFlex(R) in July 2004 contributed to the positive
development in Novo Nordisk's market share during the second half of 2004;
however, the government-mandated reduction in reimbursement prices in April 2004
impacted sales negatively.
Other products
Sales of other products within the biopharmaceuticals segment, which
predominantly consists of hormone replacement therapy (HRT) related products,
grew by 11% in local currencies and by 7% in Danish kroner to DKK 1,822 million.
The sales growth in 2004 was positively impacted by the change in July 2003 of
the US distribution set-up for Novo Nordisk's HRT products and by the continued
market penetration of the low-dose continuous-combined product Activella(R) and
the topical oestrogen product Vagifem(R). However, global sales in 2004 were
negatively impacted by the overall contraction of the HRT market.
Costs, licence fees and other operating income
The cost of goods sold increased by 9% to DKK 8,050 million, representing a
gross margin of 72.3%, an increase from 71.7% in 2003. Gains from an improved
product mix as well as productivity increases, totalling slightly above 1
percentage point, were only partially offset by a negative currency impact.
Total non-production-related costs increased by 9% to DKK 14,576 million. The
increase reflects especially costs related to sales and distribution, which
increased in line with the growth in sales. The main drivers of sales and
distribution costs in 2004 were, respectively, launch activities for Levemir(R)
in Europe; an increased US sales force, primarily focusing on promotion of
insulin products but also related to the changed set-up for HRT products; and
costs related to an impairment charge on intangible assets in Brazil.
As a consequence of the implementation of IFRS 2 'Share-based payment', Novo
Nordisk in 2004 expensed costs related to share-based programmes amounting to
DKK 104 million. The comparable expense included in the IFRS-based statements
for 2003 was DKK 76 million.
Total costs related to depreciation, amortisation and impairment losses in 2004
were DKK 1,892 million compared to DKK 1,581 million in 2003. The costs for 2004
include DKK 326 million in non-recurring impairment charges, compared to DKK 178
million in 2003.
Total income related to licence fees and other operating income was DKK 575
million in 2004 compared to DKK 1,036 million in 2003, primarily reflecting a
lower level of non-recurring income in 2004.
Net financials and tax
Net financials showed a net income of DKK 477 million in 2004 compared to DKK
954 million in 2003, reflecting a lower level of hedging income in 2004. The
foreign exchange hedging gains, primarily related to the hedging of the US
dollar, were DKK 663 million compared to DKK 1,195 million in 2003. Foreign
exchange hedging gains in the fourth quarter of 2004 were positively impacted by
unrealised gains from the mark-to-market valuation of foreign exchange options,
primarily related to the US dollar.
Novo Nordisk has currently hedged expected net cash flows in relation to US
dollars, Japanese yen and British pounds for 14, 11 and 8 months, respectively.
The effective tax rate for 2004 was 33%, down from 34% in 2003, corresponding to
a total tax expense of DKK 2,444 million in 2004.
Capital expenditure
Net capital expenditure for property, plant and equipment for 2004 was realised
at DKK 3.0 billion, compared to DKK 2.3 billion for 2003. The main investment
projects in 2004 were the expansion of purification capacity for Levemir(R), as
well as expansion of filling capacity for insulin products, including
FlexPen(R).
Free cash flow and financial resources
Free cash flow for 2004 was realised at DKK 4,278 million compared to DKK 3,846
million for 2003. This is higher than previously anticipated and is primarily
related to a reduction in the average number of credit days for trade
receivables.
Novo Nordisk's financial resources at the end of 2004 were DKK 10.2 billion
compared to DKK 11.4 billion in 2003. Included in the financial resources are
undrawn committed credit facilities of close to DKK 6.7 billion.
Outlook 2005
Novo Nordisk expects a 10-15 percentage-point growth in SALES for 2005 measured
in local currencies based on expectations of a strong market for insulin
products in general and the continued market penetration of Novo Nordisk's
insulin analogue portfolio, combined with expectations of increasing
NovoSeven(R) and Norditropin(R) SimpleXx(R) sales. However, as a consequence of
the continued challengING currency environment, primarily related to the US
dollar and related currencies, the sales growth measured in Danish kroner is
expected to be around 10%.
For 2005, OPERATING PROFIT growth measured in local currencies and excluding the
impact from non-recurring items is expected to be in line with Novo Nordisk's
long-term target of growing operating profit by 15%. Measured in Danish kroner
the growth in operating profit is expected to be around 5%, reflecting a
significant, negative currency impact and no major non-recurring income in 2005.
Novo Nordisk expects a NET FINANCIAL EXPENSE of DKK 100 million, reflecting
* a financial income, net of around DKK 100 million (excluding Novo
Nordisk's share of loss & profit in associated companies), primarily
related to expected gains from foreign exchange hedging contracts; and
* a negative impact from losses in associated companies of around DKK
200 million, primarily reflecting Novo Nordisk's share of the expected
loss in ZymoGenetics, Inc.
Given the prevailing Danish corporation tax regime, Novo Nordisk expects the TAX
RATE to be 32%, 1 percentage point lower than the tax rate realised for 2004.
Novo Nordisk plans CAPITAL EXPENDITURES of close to DKK 4 billion in 2005,
primarily related to the construction of production plants for Levemir(R) as
well as additional filling capacity for insulin products. Capital expenditure
will include purchase of fixed assets from Aradigm Corporation of approximately
DKK 300 million related to the transfer of the AERx(R) iDMS project to Novo
Nordisk. DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES are expected to be
around DKK 1.9 billion and the FREE CASH FLOW to be more than DKK 2 billion.
All of the above expectations are provided that currency exchange rates remain
at the current level for 2005. All other things being equal, movements in key
invoicing currencies will impact Novo Nordisk's operating profit in 2005 as
illustrated below.
INVOICING ANNUAL IMPACT ON NOVO NORDISK'S OPERATING PROFIT IN 2005
CURRENCY OF A 5% MOVEMENT IN CURRENCY
USD DKK 280 million
JPY DKK 130 million
GBP DKK 80 million
USD-related DKK 70 million
Note: USD-related currencies include CNY, CAD, ARS, BRL, MXN, CLP, SGD, TWD
and INR
RESEARCH AND DEVELOPMENT UPDATE
DIABETES CARE
In December, Novo Nordisk filed the amended New Drug Application related to
Levemir(R) with the US regulatory authorities (FDA), anD Novo Nordisk expects a
US marketing approval around mid-2005, following an expected six months' review
period by the FDA.
The liraglutide phase 2b study was, as expected, initiated in January 2005 and
Novo Nordisk still expects to initiate the phase 3 clinical trial around the
turn of the year 2005/6.
Novo Nordisk and the diabetes business unit of Medtronic Inc entered into an
agreement in November, covering the US and Puerto Rico, to develop the world's
first prefilled cartridge for use with Paradigm(R), Medtronic's external insulin
pumps. Prefilled cartridges containing NovoLog(R) are expected to offer a
convenient treatment option for people using Paradigm(R) pump therapy.
Novo Nordisk has completed the restructuring transaction with Aradigm
Corporation related to the AERx(R) insulin Diabetes Management System (iDMS),
giving Novo Nordisk full development and manufacturing rights to the programme
as of 26 January 2005. Following the fulfilment of closing conditions, including
approval by the US competition authorities as well as approval by Aradigm's
shareholders, Novo Nordisk's wholly-owned affiliate Novo Nordisk Delivery
Technologies, Inc now employs approximately 130 former Aradigm employees who
have been dedicated to the AERx(R) iDMS programme.
In November, The University of Oxford Diabetes Trials Unit, in collaboration
with Novo Nordisk, initiated the 4-T study (Treating To Target in Type 2
Diabetes). The study compares safety and efficacy of three different insulin
treatment regimens in patients with type 2 diabetes, who are inadequately
controlled with oral antidiabetic agents. The objective of this three-year study
is to provide evidence and guidance on 'how best to treat people with type 2
diabetes with insulin', with the aim of preventing long-term complications and
preserve quality of life. Initial results from the study, which includes
approximately 700 patients, are expected during 2006, with final results
expected during 2008.
BIOPHARMACEUTICALS
Novo Nordisk submitted the regulatory dossier for marketing approval of the use
of NovoSeven(R) for treatment of blunt trauma to the European Medicines Agency
in early January 2005. The application is a supplemental new drug application
with an expected six months' review time. Novo Nordisk still expects to initiate
a US trauma trial in the second quarter of 2005. The study is expected to
comprise some 600 blunt and penetrating trauma patients.
Following recent consultations with the FDA, Novo Nordisk expects to initiate a
confirmatory clinical trial in the US and Europe as well as in other countries
for the use of NovoSeven(R) in intracerebral haemorrhage (ICH) mid-2005,
involving some 450 patients. Novo Nordisk expects this trial to generate further
clinical documentation for filing with the FDA for regulatory approval in the US
of NovoSeven(R) in connection with ICH. Novo Nordisk still expects to file an
application by mid-2005 for marketing approval in Europe foR the use of
NovoSeven(R) in connection with ICH.
In November, the Japanese Ministry of Health, Labour and Welfare granted
approval of NovoSeven(R) for treatment of bleeding episodes iN patients with
acquired haemophilia, in addition to the existing approval for treatment of
congenital haemophilia patients with inhibitors.
Also in November, Novo Nordisk was granted marketing authorisation in the US for
Norditropin(R) for treatment of severe growth hormone deficiency in adults.
Following analysis of the phase 2 data on the use of human growth hormone in
complicated fractures, further clinical development has been discontinued. The
phase 2 data showed a significant acceleration of fracture healing; however,
pharma-economic analysis did not justify further clinical development. Novo
Nordisk will continue to develop human growth hormone for other new therapeutic
indications.
Equity
Total equity was DKK 26,504 million at the end of 2004, equal to 70.8% of total
assets, compared to 71.7% at the end of 2003. Please refer to appendix 4 for
further elaboration of changes in equity during 2004.
Proposed dividend
At the Annual General Meeting on 9 March 2005, the Board of Directors will
propose a 9% increase in dividend to DKK 4.80 per share of DKK 2, corresponding
to a pay-out ratio of 31.8%, compared to 30.8% for the financial year 2003. No
dividend will be paid on the company's holding of own shares.
Treasury shares and share repurchase programme
As per 28 January 2005, Novo Nordisk A/S and its wholly-owned affiliates owned
22,585,129 of its own B shares, corresponding to 6.37% of the total share
capital. During 2004, Novo Nordisk purchased 6,480,000 B shares at a cash value
of DKK 2 billion, which is in line with the share repurchase programme as
announced in April 2004. Novo Nordisk still expects to purchase additional B
shares during 2005 equivalent to a cash value of DKK 2 billion, with the
remaining shares under the total DKK 5 billion share repurchase programme to be
acquired during 2006.
Corporate governance
Long-term share-based incentive programme
As from 2004, Novo Nordisk's Executive Management and Senior Management Board
(26 in total) participate in a performance-based incentive programme where Novo
Nordisk B shares are annually allocated to a bonus pool when certain predefined
business-related targets have been achieved. The annual maximum allocation of
shares to the bonus pool is capped at the equivalent of eight months of salary
per participant. The shares in the bonus pool are locked up for a three-year
period before they are transferred to the executives at the expiry of the
three-year lock-up period. Based on an assessment of the economic value
generated in 2004 as well as the performance of the R&D portfolio and key
sustainability projects, the Board of Directors on 27 January 2005 approved the
establishment of a bonus pool for 2004 by allocating a total of 126,344 Novo
Nordisk B shares, corresponding to a cash value of DKK 33.7 million. This
allocation amounts to seven months of salary on average per participant.
For further information on incentive programmes for senior management and other
employees in Novo Nordisk, please refer to appendix 7.
Audit Committee
The Audit Committee, which was established by the Board of Directors in March
2004, continues to be responsible, on behalf of the Board, for a number of
predefined tasks. These include overseeing the internal and external auditors,
accounting policies and internal controls, as well as procedures for handling
complaints regarding financial reporting matters.
Sustainability issues
At the end of 2004, through Novo Nordisk's global health programme, 150,000
people with diabetes were trained or treated at diabetes clinics in the eight
countries that were selected as key priorities when the programme was launched
in 2001. A recent agreement with the Tanzanian Ministry of Health, to establish
a national diabetes care programme in Tanzania and improve education and
training of doctors and nurses, marks a shift of strategy. Whereas the first
initiatives began as partnerships with local diabetes associations providing
diabetes awareness, education and treatment, focus in future will be on
partnerships with governments. Novo Nordisk's investments to improve diabetes
diagnosis and care in Tanzania have proved successful with tangible benefits to
the country.
In 2004, Novo Nordisk developed a strategy for addressing the climate change
challenge, one of the most pressing environmental risks facing industry. In
November 2004, Novo Nordisk and WWF entered into an agreement according to which
Novo Nordisk will set a target to have reduced its net CO2 emissions by 2014. By
setting the target for absolute reduction, which we consider ambitious and
achievable, Novo Nordisk will demonstrate environmental leadership and corporate
responsibility. Setting such a target will enable Novo Nordisk to become part of
the WWF Climate Savers programme. As part of the agreement Novo Nordisk's
greenhouse gas emissions inventory will be verified by independent technical
experts against the GHG protocol, and the agreement will be tailored to the
circumstances and operating sector of the company. In 2004, CO2 emissions were
253,000 tons, which will serve as the basis for evaluation of the target
achievement.
In a global survey of corporate sustainability reports, released in November
2004 by SustainAbility, UNEP and Standard & Poor's, Novo Nordisk was ranked
second in the world for its ability to identify and manage social and
environmental issues as part of 'how we do business'. The benchmark study 'Risk
& Opportunity: Best Practice in Non-Financial Reporting', gives Novo Nordisk a
score of 69% - a solid improvement from 2002. The survey highlights Novo
Nordisk's reporting: the Novo Nordisk Way of Management is seen as "a convincing
approach to embedding sustainable development in the company's culture and
corporate governance", and the company's ability to report robustly and
transparently on commitments, targets and activities is "leading edge".
LEGAL ISSUES
As of 27 January 2005, Novo Nordisk Inc, together with the majority of hormone
therapy product manufacturers, is a defendant in 16 product liability lawsuits.
Since the initiation of the lawsuits in July 2004, three cases against Novo
Nordisk Inc have been dismissed by the courts. Novo Nordisk's hormone therapy
products (Activella(R) and Vagifem(R)) have been sold and marketed in the US
since 2000. Until July 2003, the products were sold and marketed exclusively in
the US by Pharmacia & Upjohn Corporation (now Pfizer). The proceedings are in
their preliminary stages; however, Novo Nordisk is not expecting the claims to
impact Novo Nordisk's financial outlook.
In January 2005, Novo Nordisk, Teva and Savient (formerly known as
Bio-Technology General) have agreed to a partial settlement of their disputes
over human growth hormone (hGH) intellectual property. Under the terms of the
agreement, the three parties have granted each other cross-licences to any
patents covering the hGH-active ingredient. An appeal of a District Court
judgment regarding one portion of the dispute will continue, as will an
interference proceeding in the US Patent and Trademark Office. The financial
terms of the agreement are not disclosed, but the financial impact has been
included in this stock exchange announcement.
Conference call details
At 10:00 CET today, corresponding to 9:00 am London time and 4:00 am New York
time, a conference call will be held. Investors will be able to listen in via a
link on novonordisk.com. This link can be found under 'Investors - Conference
call'. Presentation material for the conference call will be made available
approximately one hour before on the same page.
Forward-looking statement
The above sections contain forward-looking statements as the term is defined in
the US Private Securities Litigation Reform Act of 1995. Forward-looking
statements provide current expectations or forecasts of events such as new
product introductions, product approvals and financial performance.
Such forward-looking statements are subject to risks, uncertainties and
inaccurate assumptions. This may cause actual results to differ materially from
expectations. Factors that may affect future results include interest rate and
currency exchange rate fluctuations, delay or failure of development projects,
production problems, unexpected contract breaches or terminations,
government-mandated or market-driven price decreases for Novo Nordisk's
products, introduction of competing products, Novo Nordisk's ability to
successfully market both new and existing products, exposure to product
liability and other lawsuits, changes in reimbursement rules and governmental
laws and related interpretation thereof, and unexpected growth in costs and
expenses.
Risks and uncertainties are further described in reports filed by Novo Nordisk
with the US Securities and Exchange Commission (SEC) including the company's
Form 20-F, which was filed on 27 February 2004. Please also refer to the section
'Risk Management' in the Annual Report 2004. Novo Nordisk is under no duty to
update any of the forward-looking statements or to conform such statements to
actual results, unless required by law.
Bagsvaerd 28 January 2005
The Board of Directors
Financial calendar
1 February 2005 - PDF version of the Annual Report available on
novonordisk.com
14 February 2005 - Printed and online versions of the
Annual Report
9 March 2005 - Annual General Meeting
28 April 2005 - Financial statement for the first
quarter of 2005
11 August 2005 - Financial statement for the
first half of 2005
27 October 2005 - Financial statement for the
first nine months of 2005
27 January 2006 - Financial statement for 2005
Contacts for further information
MEDIA: INVESTORS:
Outside North America: Outside North America:
Mike Rulis Mogens Thorsager Jensen
Tel (direct): (+45) 4442 3573 Tel (direct): (+45) 4442 7945
E-mail: mike@novonordisk.com E-mail: mtj@novonordisk.com
Palle Holm Olesen
Tel (direct): (+45) 4442 6175
E-mail: phoo@novonordisk.com
In North America: In North America:
Susan T Jackson Christian Kanstrup
Tel (direct): (+1) 609 919 7776 Tel (direct): (+1) 609 919 7937
E-mail: stja@novonordisk.com E-mail: cka@novonordisk.com
Further information on Novo Nordisk is available on the company's internet
homepage at the address novonordisk.com
Appendix 1: Income statement
DKK million 2004 2003 2002
Sales 29,031 26,158 24,866
Cost of goods sold 8,050 7,409 6,598
GROSS PROFIT 20,981 18,749 18,268
Sales and distribution costs 8,280 7,451 7,187
Research and development costs 4,352 4,055 3,952
Administrative expenses 1,944 1,857 1,960
Licence fees and other operating income (net) 575 1,036 758
OPERATING PROFIT 6,980 6,422 5,927
Share of profit/(loss) in associated companies (117) (59) 72
Financial income 898 1,482 1,046
Financial expenses 304 469 717
PROFIT BEFORE INCOME TAXES 7,457 7,376 6,328
Income taxes 2,444 2,543 2,212
NET PROFIT 5,013 4,833 4,116
BASIC EARNINGS PER SHARE (DKK) 14.89 14.17 11.87
DILUTED EARNINGS PER SHARE (DKK) 14.83 14.15 11.85
SEGMENT SALES:
Diabetes care 20,533 18,475 17,458
Biopharmaceuticals 8,498 7,683 7,408
SEGMENT OPERATING PROFIT:
Diabetes care 3,404 3,142 2,346
Operating margin 16.6% 17.0% 13.4%
Biopharmaceuticals 3,576 3,280 3,581
Operating margin 42.1% 42.7% 48.3%
Appendix 2: Balance sheet
DKK million 31 DEC 2004 31 Dec 2003
ASSETS
Intangible assets 314 331
Property, plant and equipment 17,559 16,342
Investments in associated companies 883 1,040
Deferred tax assets 769 579
Long-term financial assets 159 80
TOTAL LONG-TERM ASSETS 19,684 18,372
Inventories 7,163 6,531
Trade receivables 4,062 3,785
Tax receivables 710 134
Other receivables 1,855 2,652
Marketable securities 526 1,828
Cash at bank and in hand 3,433 1,262
TOTAL CURRENT ASSETS 17,749 16,192
TOTAL ASSETS 37,433 34,564
EQUITY AND LIABILITIES
Share capital 709 709
Treasury shares (45) (33)
Share premium account 2,565 2,565
Retained earnings 22,671 20,925
Other comprehensive income 604 610
TOTAL EQUITY 26,504 24,776
Long-term debt 1,188 753
Deferred tax liabilities 1,853 1,510
Provision for pensions 250 222
Other long-term provisions 358 271
TOTAL LONG-TERM LIABILITIES 3,649 2,756
Short-term debt 507 975
Trade payables 1,061 1,008
Tax payables 631 643
Other current liabilities 3,721 3,366
Other short-term provisions 1,360 1,040
TOTAL CURRENT LIABILITIES 7,280 7,032
TOTAL LIABILITIES 10,929 9,788
TOTAL EQUITY AND LIABILITIES 37,433 34,564
Appendix 3: Cash flow statement
DKK million 2004 2003 2002
NET PROFIT 5,013 4,833 4,116
Reversals with no effect on cash flow:
Income taxes 2,444 2,543 2,212
Depreciation, amortisation and impairment losses 1,892 1,581 1,293
Interest income and interest expenses (128) (101) (54)
Other reversals with no effect on cash flow 1,018 365 291
Income taxes paid (2,866) (1,804) (2,266)
Interest received and interest paid (net) 109 67 120
CASH FLOW BEFORE CHANGE IN WORKING CAPITAL 7,482 7,484 5,712
CHANGE IN WORKING CAPITAL:
(Increase)/decrease in trade receivables
and other receivables 211 (721) 312
(Increase)/decrease in inventories (623) (571) (1,131)
Increase/(decrease) in trade payables and
other liabilities 519 (43) (26)
CASH FLOW FROM OPERATING ACTIVITIES 7,589 6,149 4,867
INVESTMENTS:
Divestment of subsidiaries - - 52
Acquisition of subsidiaries - 10 (448)
Purchase of intangible assets and long-term
financial assets (312) (40) (81)
Sale of property, plant and equipment 140 185 50
Purchase of property, plant and equipment (3,139) (2,458) (3,943)
Net change in marketable securities
(over three months) 1,310 (1,516) 1,085
CASH FLOW FROM INVESTING ACTIVITIES (2,001) (3,819) (3,285)
FINANCING:
New long-term debt 505 476 -
Repayment of long-term debt (574) (23) (18)
Purchase of treasury shares (1,982) (1,619) (386)
Sale of treasury shares 87 15 39
Dividends paid (1,488) (1,243) (1,161)
CASH FLOW FROM FINANCING ACTIVITIES (3,452) (2,394) (1,526)
NET CASH FLOW 2,136 (64) 56
Unrealised gain/(loss) on exchange
rates and marketable securities in cash
and cash equivalents (14) (14) (22)
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,122 (78) 34
Cash and cash equivalents at the beginning
of the year 841 919 885
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 2,963 841 919
Bonds with term to maturity exceeding
three months 508 1,810 301
Undrawn committed credit facilities 6,694 8,701 7,961
FINANCIAL RESOURCES AT THE END OF THE YEAR 10,165 11,352 9,181
FREE CASH FLOW 4,278 3,846 497
Appendix 4: Statement of changes in equity
Other
comprehensive
income
Deferred
gain/
Share Exchange loss on
Share Treasury premium Retained rate cash flow Other
DKK million capital shares account earnings adjustments hedges adjustments TOTAL
2004
Balance at the beginning of the year 709 (33) 2,565 20,925 (79) 513 176 24,776
Exchange rate adjustment of investments in
subsidiaries 39 39
Deferred (gain)/loss on cash flow
hedges at the beginning of the year
recognised in the Income statement
for the year (513) (513)
Deferred gain/(loss) on cash flow
hedges at the end of the year 461 461
Other adjustments 7 7
Net income recognised directly in - - - - 39 (52) 7 (6)
equity
Net profit for the year 5,013 5,013
Total income for the year - - - 5,013 39 (52) 7 5,007
Cost of share-based payment 104 104
Purchase of treasury shares (13) (1,969) (1,982)
Sale of treasury shares 1 86 87
Dividends (1,488) (1,488)
BALANCE AT THE END OF THE YEAR 709 (45) 2,565 22,671 (40) 461 183 26,504
At the end of the year proposed
dividends of DKK 1,594 million are
included in retained earnings.
No dividend is declared on treasury
shares.
2003
Balance at the beginning of the year 709 (19) 2,565 18,849 (85) 391 67 22,477
Exchange rate adjustment of investments in
subsidiaries 6 6
Deferred (gain)/loss on cash flow
hedges at the beginning of the year
recognised in the Income statement
for the year (391) (391)
Deferred gain/(loss) on cash flow
hedges at the end of the year 513 513
Other adjustments 109 109
Net income recognised directly in
equity - - - - 6 122 109 237
Net profit for the year 4,833 4,833
Total income for the year - - - 4,833 6 122 109 5,070
Cost of share-based payment 76 76
Purchase of treasury shares (14) (1,605) (1,619)
Sale of treasury shares - 15 15
Dividends (1,243) (1,243)
BALANCE AT THE END OF THE YEAR 709 (33) 2,565 20,925 (79) 513 176 24,776
At the end of the year proposed dividends of DKK 1,488 million are included in
retained earnings. No dividend is declared on treasury shares.
2002
Balance at the beginning of the year 709 (16) 2,565 16,200 - 116 126 19,700
Exchange rate adjustment of investments in
subsidiaries (85) (85)
Deferred (gain)/loss on cash flow
hedges at the beginning of the year
recognised in the Income statement
for the year (116) (116)
Deferred gain/(loss) on cash flow
hedges at the end of the year 391 391
Other adjustments (59) (59)
Net income recognised directly in
equity - - - - (85) 275 (59) 131
Net profit for the year 4,116 4,116
Total income for the year - - - 4,116 (85) 275 (59) 4,247
Cost of share-based payment 38 38
Purchase of treasury shares (4) (382) (386)
Sale of treasury shares 1 38 39
Dividends (1,161) (1,161)
BALANCE AT THE END OF THE YEAR 709 (19) 2,565 18,849 (85) 391 67 22,477
At the end of the year proposed dividends of DKK 1,243 million are included in
retained earnings. No dividend is declared on treasury shares.
Appendix 5: Quarterly numbers in DKK
(Amounts in DKK million, except number of employees, earnings per share and
number of shares outstanding.)
% change
2004 2003 Q4 2003-
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 2004
SALES 7,944 7,408 7,164 6,515 7,111 6,603 6,435 6,009 12%
Gross profit 5,783 5,318 5,219 4,661 4,982 4,793 4,633 4,341 16%
Gross margin 72.8% 71.8% 72.9% 71.5% 70.1% 72.6% 72.0% 72.2%
Sales and distribution costs 2,364 2,039 1,991 1,886 2,059 1,837 1,821 1,734 15%
Percent of sales 29.8% 27.5% 27.8% 28.9% 29.0% 27.8% 28.3% 28.9%
Research and development costs 1,243 1,086 983 1,040 1,128 1,015 972 940 10%
Percent of sales 15.6% 14.7% 13.7% 16.0% 15.9% 15.4% 15.1% 15.6%
Administrative expenses 534 502 431 477 487 490 420 460 10%
Percent of sales 6.7% 6.8% 6.0% 7.3% 6.8% 7.4% 6.5% 7.7%
Licence fees and other operating
income (net) 213 59 71 232 423 216 226 171 -50%
OPERATING PROFIT 1,855 1,750 1,885 1,490 1,731 1,667 1,646 1,378 7%
Operating margin 23.4% 23.6% 26.3% 22.9% 24.3% 25.2% 25.6% 22.9%
Share of profit in associated
R&D companies (32) 7 (44) (38) 78 (45) (41) (63) -141%
Share of profit in other
associated companies 12 5 4 (31) 7 (2) (2) 9 71%
Financial income 491 125 104 178 438 177 446 421 12%
Financial expenses 186 52 44 22 117 103 116 133 59%
Profit before taxation 2,140 1,835 1,905 1,577 2,137 1,694 1,933 1,612 0%
NET PROFIT 1,462 1,226 1,272 1,053 1,395 1,111 1,271 1,056 5%
Depreciation, amortisation and
impairment losses 549 576 387 380 553 363 356 309 -1%
Capital expenditure 1,092 873 642 392 905 383 519 466 21%
Cash flow from operating activities 2,103 2,426 1,710 1,350 221 2,317 1,437 2,174 852%
Free cash flow 903 1,533 956 886 (703) 1,932 910 1,707 -228%
Equity 26,504 25,557 24,827 23,942 24,776 23,587 22,692 21,712 7%
Total assets 37,433 35,587 34,248 33,838 34,564 35,140 33,103 31,382 8%
Equity ratio 70.8% 71.8% 72.5% 70.8% 71.7% 67.1% 68.5% 69.2%
Full-time employees at the end
of the period 20,285 20,001 19,631 19,179 18,756 18,664 18,465 18,221 8%
Diluted earnings per share (in DKK)* 4.37 3.63 3.74 3.10 4.11 3.26 3.72 3.06 6%
Average number of shares outstanding (million)*
- used for diluted earnings per share 334.7 338.2 339.8 339.8 339.1 340.7 342.0 344.6 -1%
Sales by business segments:
Insulin analogues 1,332 1,252 1,037 886 792 705 572 484 68%
Human insulin and insulin-related sales 3,944 3,593 3,640 3,206 3,936 3,526 3,642 3,388 0%
Oral antidiabetic products (OAD) 403 445 379 416 388 384 298 360 4%
DIABETES CARE TOTAL 5,679 5,290 5,056 4,508 5,116 4,615 4,512 4,232 11%
NovoSeven(R) 1,170 1,086 1,084 1,019 933 1,002 990 918 25%
Growth hormone therapy 651 559 557 550 584 516 534 499 11%
Hormone replacement therapy 364 396 389 339 397 358 290 277 -8%
Other products 80 77 78 99 81 112 109 83 -1%
BIOPHARMACEUTICALS TOTAL 2,265 2,118 2,108 2,007 1,995 1,988 1,923 1,777 14%
Sales by geographic segments:
Europe 3,364 3,057 3,106 2,884 3,153 2,909 2,923 2,712 7%
North America 1,816 2,098 1,837 1,727 1,584 1,634 1,471 1,530 15%
International Operations 1,559 1,171 1,134 980 1,233 1,026 1,058 910 26%
Japan & Oceania 1,205 1,082 1,087 924 1,141 1,034 983 857 6%
Segment operating profit:
Diabetes care 1,047 746 936 675 953 742 770 677 10%
Biopharmaceuticals 808 1,004 949 815 778 925 876 701 4%
*) For Q4 2004 diluted earnings per share/ADR of a nominal value of DKK 2, which
include options on Novo Nordisk's treasury shares with an exercise price below
current market value, have been based on an average number of shares of
334,689,470.
Appendix 6: Quarterly numbers in EUR
(Amounts in EUR million, except number of employees, earnings per share and
number of shares outstanding.)
Key figures are translated into EUR as supplementary information - the
translation is based on average exchange rate for income statement and exchange
rate at the balance sheet date for balance sheet items.
% change
2004 2003 Q4 2003-
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 2004
SALES 1,068 997 962 875 956 889 866 809 12%
Gross profit 778 715 701 626 670 645 624 584 16%
Gross margin 72.8% 71.8% 72.9% 71.5% 70.1% 72.6% 72.0% 72.2%
Sales and distribution costs 318 274 268 253 277 247 246 233 15%
Percent of sales 29.8% 27.5% 27.8% 28.9% 29.0% 27.8% 28.3% 28.9%
Research and development costs 167 146 132 140 152 137 130 127 10%
Percent of sales 15.6% 14.7% 13.7% 16.0% 15.9% 15.4% 15.1% 15.6%
Administrative expenses 72 67 58 64 64 67 56 62 10%
Percent of sales 6.7% 6.8% 6.0% 7.3% 6.8% 7.4% 6.5% 7.7%
Licence fees and other operating
income (net) 28 8 10 31 56 30 30 23 -50%
OPERATING PROFIT 249 236 253 200 233 224 222 185 7%
Operating margin 23.4% 23.6% 26.3% 22.9% 24.3% 25.2% 25.6% 22.9%
Share of profit in associated
R&D companies (3) (1) (5) (5) 10 (6) (6) (8) -141%
Share of profit in other
associated companies 2 1 - (4) 1 - - 1 71%
Financial income 65 17 14 24 60 23 60 57 12%
Financial expenses 25 7 6 3 16 13 16 18 59%
Profit before taxation 288 246 256 212 288 228 260 217 0%
NET PROFIT 197 165 171 141 187 150 171 142 5%
Depreciation, amortisation and
impairment losses 74 77 52 51 75 48 48 42 -1%
Capital expenditure 147 117 86 53 122 52 70 63 21%
Cash flow from operating activities 283 326 230 181 30 312 193 293 852%
Free cash flow 121 207 128 119 (95) 260 122 230 -228%
Equity 3,563 3,434 3,340 3,216 3,328 3,176 3,054 2,924 7%
Total assets 5,033 4,782 4,608 4,545 4,643 4,732 4,455 4,226 8%
Equity ratio 70.8% 71.8% 72.5% 70.8% 71.7% 67.1% 68.5% 69.2%
Full-time employees at the end
of the period 20,285 20,001 19,631 19,179 18,756 18,664 18,465 18,221 8%
Diluted earnings per share (in EUR)* 0.58 0.49 0.50 0.42 0.55 0.44 0.50 0.41 6%
Average number of shares outstanding (million)*
- used for diluted earnings per share 334.7 338.2 339.8 339.8 339.1 340.7 342.0 344.6 -1%
Sales by business segments:
Insulin analogues 179 169 139 119 107 95 77 65 68%
Human insulin and insulin-related sales 531 483 489 430 530 474 490 456 0%
Oral antidiabetic products (OAD) 54 60 51 56 52 51 41 48 4%
DIABETES CARE TOTAL 764 712 679 605 689 620 608 569 11%
NovoSeven(R) 157 147 145 137 125 135 133 124 25%
Growth hormone therapy 87 75 75 74 78 70 72 67 11%
Hormone replacement therapy 49 53 52 46 53 49 39 37 -8%
Other products 11 10 11 13 11 15 14 12 -1%
BIOPHARMACEUTICALS TOTAL 304 285 283 270 267 269 258 240 14%
Sales by geographic segments:
Europe 452 411 418 387 424 392 392 366 7%
North America 244 282 247 232 213 220 198 206 15%
International Operations 210 157 152 132 166 138 143 122 26%
Japan & Oceania 162 147 145 124 153 139 133 115 6%
Segment operating profit:
Diabetes care 141 101 125 91 128 100 104 91 10%
Biopharmaceuticals 109 135 128 109 105 124 118 94 4%
*) For Q4 2004 diluted earnings per share/ADR of a nominal value of DKK 2, which
include options on Novo Nordisk's treasury shares with an exercise price below
current market value, have been based on an average number of shares of
334,689,470.
Appendix 7: Incentive programmes
1. LONG-TERM SHARE-BASED INCENTIVE PROGRAMME FOR SENIOR MANAGEMENT
As from 2004, the six members of Executive Management and 20 members of the
Senior Management Board are no longer included in Novo Nordisk's share option
plan. The option plan has been replaced by a share-based incentive programme.
This incentive programme is based on an annual calculation of shareholder value
creation compared to the planned performance for the year.
In line with Novo Nordisk's long-term financial targets, the calculation of
value creation is based on reported operating profit after tax reduced by a
WACC-based return requirement on average invested capital. A proportion of the
marginal value creation will be transferred to a bonus pool for participating
executives. The calculated bonus pool may, subject to the Board of Directors'
assessment, be reduced by a lower than expected performance on significant
research and development projects and key sustainability projects.
The bonus pool will operate with a maximum contribution per participant equal to
eight months of salary. Once the performance-based bonus pool has been approved
by the Board of Directors, the bonus pool is converted into Novo Nordisk B
shares at the market price prevailing when the financial results for the year
prior to the bonus year were released. The bonus pool of shares will be
established when approved by the Board of Directors, but will be locked up for
three years before it is transferred to the participants at the end of the
three-year period.
In the lock-up period, the bonus pool may potentially be reduced due to lower
than planned value generation in subsequent years. The participant will have to
be employed by Novo Nordisk at the end of the lock-up period to be eligible for
the transfer of shares from the bonus pool.
In 2004, the allocation to the bonus pool amounts to DKK 33.7 million,
corresponding to seven months of salary. This amount was expensed in 2004. The
cash amount has been converted into 126,344 Novo Nordisk B shares using a share
price of DKK 267, equal to the average trading price for Novo Nordisk B shares
on the Copenhagen Stock Exchange from 6 to 20 February 2004. Based on the split
of participants at the establishment of the bonus pool, approximately 40% of the
pool will be allocated to the members of Executive Management and 60% to the
members of the Senior Management Board.
As the long-term share-based incentive programme is evaluated by the Board of
Directors to have worked successfully in 2004, it will continue in 2005 with an
unchanged structure.
2. SHARE OPTION PROGRAMME FOR 2004
The grant of share options to approximately 400 employees, excluding the members
of Executive Management and the Senior Management Board, in accordance with Novo
Nordisk's share option programme is subject to the achievement of shareholder
value-based targets as determined by the Board of Directors. For 2004, targets
were established for Operating Profit and Return on Invested Capital,
respectively.
As the two financial targets for 2004 were achieved, a total of 809,416 share
options will be granted at an exercise price of DKK 267 per option. The options
can be exercised in the period 31 January 2008 - 30 January 2013. The value of
the share option programme is estimated to be DKK 84 million, based on the
Black-Scholes model. The company's holding of its own shares will cover this
commitment.
Appendix 8: Adoption of IFRS
As of 1 January 2004, the accounting policies have been changed to comply with
International Financial Reporting Standards (IFRS). The date of transition is 1
January 2002 and all comparative figures for 2000 - 2003 have been restated.
Following IFRS 1 all standards and interpretations effective at 31 December 2004
have been applied.
The following standards with effective date after 31 December 2004 have also
been applied:
- IFRS 2 'Share-based Payment' (issued February 2004) IFRS 2 has been applied
retrospectively to all grants of employee shares and share options from
1997 to 2004.
- The revised standards IAS 32 'Financial Instruments: Disclosure and
Presentation' and IAS 39 'Financial Instruments: Recognition and
Measurement'
- All the revised standards in the IASB's improvement project, ie: IAS 1, IAS
2, IAS 8, IAS 10, IAS 16, IAS 17, IAS 21, IAS 24, IAS 27, IAS 28, IAS 31,
IAS 33 and IAS 40.
The standard IFRS 5 'Non-current Assets Held for Sale and Discontinued
Operations' with effective date 1 January 2005 has not been applied. IFRS 5 will
be applied in accordance with the effective date 1 January 2005. The standard
will be applied prospectively and only affect future transactions. The impact of
application is not expected to be significant.
The adoption of IFRS results in changes to the accounting policies in the
following areas:
a) ACCOUNTING FOR ASSOCIATED R&D COMPANIES - Novo Nordisk's share of profit or
loss in associated research and development companies, including impairment
losses, is included in share of profit and loss in associated companies and
is therefore no longer included in research and development costs. Novo
Nordisk's capital gains on dilution or sale of investments in associated
research and development companies is included in share of profit or loss
in associated companies and therefore no longer in Licence fees and other
operating income (net). The method of calculating Novo Nordisk's share of
profit or loss in an associated company is slightly changed.
b) MARKET VALUE OF CURRENCY OPTIONS - currency options hedging future cash
flow are measured at market value at the balance sheet date. As a
consequence of the detailed IFRS requirements for allowing hedge accounting
for currency options, the current use does not qualify for cash flow hedge
accounting. Value adjustments are therefore recognised in the Income
statement under financial income or financial expenses.
c) SHARE-BASED PAYMENT - in accordance with IFRS 2 'Share-based payment' the
fair value of employee services received in exchange for the grant of
share-based compensation plans is recognised as an expense, and allocated
over the vesting period.
d) PROVISION FOR PENSIONS - provisions for pension commitments and similar
obligations are calculated in accordance with IAS 19. All actuarial gains
and losses are recognised in the balance sheet at 1 January 2002 in
accordance with IFRS 1.
e) BORROWING COSTS - all interest expenses are recognised as an expense in the
period in which they are incurred. Interest expenses on loans financing
construction of major investments are no longer included in the cost of the
assets.
f) CASH DISCOUNTS AND CERTAIN REBATES - in line with the development in
international practice, cash discounts are now classified as a deduction
from sales. Previously cash discounts were reported as Sales and
distribution costs. Certain rebates are reclassified from Sales and
distribution costs to sales.
g) LONG-TERM BONDS - cash and cash equivalents consist of cash and marketable
securities which at the date of acquisition had a maturity not exceeding
three months. The cash flow from marketable securities, which at the date
of acquisition had a maturity exceeding three months, is included in cash
flow from investing activities.
h) DEFERRED TAX ASSETS are presented as long-term assets and are no longer
offset in provisions for deferred tax.
i) SOFTWARE - development costs of software in relation to major IT projects
for internal use are reclassified from property, plant and equipment to
intangible assets.
j) In the income statement gains and losses on derivative financial
instruments are no longer offset in the gains and losses of the hedged
items. This has the effect that a foreign exchange loss of DKK 229 million
in 2003 (DKK 510 million in 2002) is reclassified from financial income to
financial expenses.
k) LONG-TERM EMPLOYEE BENEFITS - provisions are recognised for certain
long-term employee benefits.
l) DILUTED EARNINGS PER SHARE - are calculated in accordance with IAS 33,
which causes a change in the calculation of the dilutive effect.
m) OTHER minor effects from adopting IFRS.
The changes regarding share-based payment, cash discounts and long-term employee
benefits were not included in the unaudited reconciliations to IFRS included in
the Annual Financial Report 2003 and the Stock Exchange Announcement for the
first three quarters of 2004.
To illustrate the effect of adopting IFRS in the Novo Nordisk Group the
following reconciliations of the reported figures for 2002 and 2003 under
previous Danish GAAP to the IFRS figures have been prepared.
The letters a) to m) in the tables below refer to descriptions of the changes in
accounting policies due to IFRS adoption mentioned above.
RATIOS 2003 2002
PREVIOUS PREVIOUS
GAAP IFRS GAAP IFRS
Growth in operating profit 6.8% 8.4% 6.5% 9.6%
Operating profit margin 24.1% 24.6% 23.7% 23.8%
Return on invested capital (ROIC) 19.1% 19.5% 20.1% 20.5%
Cash/earnings, three-year average 32.0% 32.3% 34.9% 43.1%
Basic earnings per share (DKK) 14.24 14.17 11.81 11.87
Diluted earnings per share (DKK) 14.14 14.15 11.72 11.85
CONSOLIDATED INCOME STATEMENT
2003 2002
PREVIOUS PREVIOUS
DKK million GAAP IFRS IFRS GAAP IFRS IFRS
EFFECT EFFECT
Sales 26,541 (383) 26,158 25,187 (321) 24,866
Cost of goods sold 7,439 (30) 7,409 6,633 6,598 (35)
GROSS PROFIT 19,102 (353) 18,749 18,554 (286) 18,268
Sales and distribution costs 7,799 (348) 7,451 7,479 (292) 7,187
Research and development costs 4,193 (138) 4,055 4,139 (187) 3,952
Administrative expenses 1,847 10 1,857 1,951 9 1,960
Licence fees and other operating
income (net) 1,121 (85) 1,036 994 (236) 758
OPERATING PROFIT 6,384 38 6,422 5,979 (52) 5,927
Share of profit/(loss) in
associated companies 12 (71) (59) 27 45 72
Financial income 1,214 268 1,482 475 571 1,046
Financial expenses 227 242 469 181 536 717
PROFIT BEFORE INCOME TAXES 7,383 (7) 7,376 6,300 28 6,328
Income taxes 2,525 18 2,543 2,205 7 2,212
NET PROFIT 4,858 (25) 4,833 4,095 21 4,116
DKK million 2003 2002
OPERATING PROFIT - PREVIOUS GAAP
a) Accounting for associated R&D companies -
reclassification of share of profit or loss 6,384 5,979
a) Accounting for associated R&D companies -
reclassification of capital gain 150 194
(85) (236)
c) Share-based payment (76) (38)
d) Provisions for pensions 10 (11)
e) Borrowing costs - depreciation 38 38
m) Other 1 1
OPERATING PROFIT - IFRS 6,422 5,927
NET PROFIT - PREVIOUS GAAP 4,858 4,095
a) Accounting for associated R&D companies - increased
share of profit or loss (9) (9)
b) Market value of currency options 30 50
c) Share-based payment (69) (28)
d) Provision for pensions 6 (7)
e) Borrowing costs - depreciation 38 38
e) Borrowing costs - interest expenses as incurred (10) (14)
m) Other (11) (9)
NET PROFIT - IFRS 4,833 4,116
CONSOLIDATED BALANCE SHEET
2003 2002
PREVIOUS IFRS PREVIOUS IFRS
DKK million GAAP EFFECT IFRS GAAP EFFECT IFRS
Intangible assets 220 111 331 240 111 331
Property, plant and equipment 16,828 (486) 16,342 16,205 (524) 15,681
Investments in associated companies 1,009 31 1,040 1,202 47 1,249
Deferred income tax assets - 579 579 - 559 559
Other financial assets 80 - 80 77 2 79
Inventories 6,531 - 6,531 5,919 - 5,919
Trade receivables 6,636 (65) 6,571 6,115 (91) 6,024
Marketable securities 1,828 - 1,828 315 - 315
Cash at bank and in hand 1,262 - 1,262 1,423 - 1,423
TOTAL ASSETS 34,394 170 34,564 31,496 116 31,612
Equity 25,224 (448) 24,776 22,928 (451) 22,477
Total liabilities 9,170 618 9,788 8,568 567 9,135
TOTAL EQUITY AND LIABILITIES 34,394 170 34,564 31,496 116 31,612
DKK million 2003 2002
TOTAL ASSETS - PREVIOUS GAAP 34,394 31,496
a) Accounting for associated R&D companies 31 47
d) Provisions for pensions - (43)
e) Borrowing costs (382) (410)
h) Deferred tax assets 548 559
m) Other (27) (37)
TOTAL ASSETS - IFRS 34,564 31,612
TOTAL LIABILITIES - PREVIOUS GAAP 9,170 8,568
i) Deferred tax assets 548 559
Changes to deferred tax as a
result of the other changes to
accounting policies (201) (234)
d) Provisions for pensions 52 14
j) Long-term employee benefits 211 211
m) Other 8 17
TOTAL LIABILITIES - IFRS 9,788 9,135
1 Jan
2003 2002 2002
EQUITY - PREVIOUS GAAP 25,224 22,928 20,137
a) Accounting for associated R&D companies 47 31 57
b) Market value of currency options -
deferred tax effect (35) (22) (22)
c) Share-based payment - deferred tax effect 100 92 82
d) Provisions for pensions (36) (42) (15)
e) Borrowing costs (268) (287) (297)
k) Long-term employee benefits (211) (211) (211)
m) Other (29) (28) (31)
EQUITY - IFRS 24,776 22,477 19,700
CONSOLIDATED CASH FLOW STATEMENT
2003 2002
PREVIOUS IFRS PREVIOUS IFRS
DKK million GAAP EFFECT IFRS GAAP EFFECT IFRS
Cash flow from operating activities 6,159 (10) 6,149 4,881 (14) 4,867
Cash flow from investing activities*) (2,313) (1,506) (3,819) (4,384) 1,099 (3,285)
Cash flow from financing activities (2,394) - (2,394) (1,526) - (1,526)
NET CASH FLOW 1,452 (1,516) (64) (1,029) 1,085 56
Net change in cash and cash equivalents 1,435 (1,513) (78) (1,053) 1,087 34
Cash and cash equivalents at the beginning
of the year 1,234 (315) 919 2,287 (1,402) 885
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR 2,669 (1,828) 841 1,234 (315) 919
Free cash flow **) 3,846 - 3,846 497 - 497
DKK million 2003 2002
CASH FLOW FROM OPERATING
ACTIVITIES - PREVIOUS GAAP 6,159 4,881
e) Borrowing costs - cash flow
effect of interest expenses (10) (14)
CASH FLOW FROM OPERATING ACTIVITIES - IFRS 6,149 4,867
CASH FLOW FROM INVESTING ACTIVITIES -
PREVIOUS GAAP (2,313) (4,384)
e) Borrowing costs - cash flow
effect of interest expenses 10 14
g) Long-term bonds (1,513) 1,087
g) Long-term bonds - unrealised gains/losses (3) (2)
CASH FLOW FROM INVESTING ACTIVITIES - IFRS (3,819) (3,285)
CASH AND CASH EQUIVALENTS AT THE END OF THE
YEAR - PREVIOUS GAAP 2,669 1,234
g) Long-term bonds - at the end of the year (1,828) (315)
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR - IFRS 841 919
*) According to IFRS the cash flow from investments in long-term bonds (>three
months) is included in cash flow from investing activities. Excess
liquidity is primarily invested in non-callable, liquid bonds with solid
credit rating.
**) Free cash flow is not included as a subtotal in the cash flow statement
according to IFRS. Free cash flow is calculated as the sum of Cash flow
from operating activities and investing activities excluding Net change in
marketable securities (>three months). This leaves Free cash flow
unaffected by the IFRS adoption.
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: JANUARY 31 2005 NOVO NORDISK A/S
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Lars Rebien Sorensen,
President and Chief Executive Officer