Novo Nordisk

Annual Report

2020

Team Novo Nordisk, the world’s rst all-diabetes professional cycling team, are racing with 100 on their jersey to celebrate the 100-year anniversary of the discovery of insulin

Novo Nordisk A/S - Novo Allé 1, 2880 Bagsværd, Denmark - CVR no. 24256790

Contents

Management review

Introducing Novo Nordisk

Letter from the Chair ......................................... 3

Letter from the CEO .......................................... 5

Novo Nordisk at a glance...................................... 7

Business model .............................................. 8

Performance highlights ....................................... 9

Strategic Aspirations

Purpose and sustainability ................................... 11

Innovation and therapeutic focus ............................. 20

Commercial execution ....................................... 26

Financials .................................................. 29

Corporate governance

Risk management ........................................... 34

Shares and capital structure .................................. 36

Corporate governance ....................................... 38

Governance practices........................................ 40

Board of Directors........................................... 42

Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Consolidated statements

Consolidated nancial statements

Income statement........................................... 47

......................................... 48

Balance sheet .............................................. 49

Equity statement ............................................ 50

 ................. 51

Consolidated ESG statement (supplementary information)

Statement of ESG performance ............................... 81

Notes to the consolidated ESG statement . . . . . . . . . . . . . . . . . . . . . . 82

Statements and Auditor's Reports

Statement by Board of Directors and Executive Management..... 88

Independent Auditor's Reports ............................... 89

Independent Assurance Report on the ESG statement........... 91

Additional information

More information ........................................... 92

............................................ 93



all-diabetes professional cycling team

Novo Nordisk Annual Report 2020 / 2Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Letter from the Chair

The devastating impact of COVID-19 on societies and economies

in 2020 intensied existing challenges such as inequality and

poverty. However, in times of crisis, businesses play a critical role

in mobilising resources and providing solutions. Novo Nordisk

has worked hard to respond to the challenges, helping people

with serious chronic diseases while also supporting society on a

broader scale.



ensure the safety of our employees and the

uninterrupted supply of our life-saving medicines



supporting society's response to the pandemic,





government in the rapid scale-up of coronavirus

testing. At the same time, our scientists continued





Rising to the

challenge

commercial organisation embraced an increasingly







the pandemic and the turbulent business

environment, Novo Nordisk took important steps



change to defeat diabetes and other serious





Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 3

This does not mean that the road ahead is going

to be easy. The pandemic has exacted an immense













ensure that our products are accessible to all











company. It is therefore satisfying to see a healthy

product pipeline, including the pioneering science



can make to society.







this means looking beyond semaglutide, the GLP-1

-

ment Rybelsus



Ozempic



a range of conditions beyond diabetes, including



of death

– obesity and most recently also as a





establishing more external alliances and partner-

ships to complement our in-house expertise.

Above all, 2020 underscored the need for strong cor-

porate values and a shared sense of purpose. We are





delivering for both patients and investors, despite

the unprecedented disruptions caused by COVID-19.







exceptional challenges of 2020; to Lars Fruergaard

Jørgensen and his team for leading the company

through a turbulent year in such a thoughtful and

positive manner; and to our shareholders for their

continued support.

Helge Lund

Chair of the Board of Directors

It is increasingly clear that society expects more



climate change and environmental degradation, as



Indeed, the pandemic has turbocharged many of





prompting companies to pay far more attention to

sustainability.





determined to continue to raise our game.



responsibility strategy, Defeat Diabetes, and



and recycling as part of our Circular for Zero

environmental strategy.

Employees from the Novo Nordisk

research department volunteered





the Danish health service, they helped

to increase the testing capacity in

Denmark.

“Above all, 2020 underscored

the need for strong corporate

values and a shared sense

of purpose. We are fortunate

that both are well-established

across our organisation,

empowering our employees

to keep delivering for both

patients and investors,

despite the unprecedented

disruptions caused by

COVID-19.”

1. WHO, The top 10 causes of death (2020)

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 4

Letter from the CEO

The COVID-19 pandemic has taken a terrible toll around the

world – but the pain has not been shared equally. People with

underlying conditions have been hit disproportionately hard

by the virus, a fact that makes Novo Nordisk’s purpose of

driving change to defeat diabetes and other serious chronic

diseases more meaningful than ever.



and if action is not taken to bend the curve, that







must continue to do more to tackle these diseases

or risk vast future damage to millions of lives, as





diabetes and other serious chronic diseases in our

Strategic Aspirations for 2025. Appropriately, after





The power of

purpose





stepped up our commitment to our purpose by

-

bility strategy. This sets out our ambition to accel-

erate the prevention of type 2 diabetes, provide



every country and innovate to improve lives.



also aspire to have zero environmental impact.





global production – a key milestone on the road

to our target of zero CO

emissions from all

operations and transport by 2030.

1. IDF Diabetes Atlas, 9th edition, 2019

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 5







of our largest suppliers step up and meet this

target already.









a strategy of targeted investment, our scientists

are currently pursuing higher levels of innovation

across more therapy areas than at any point in





medium and long term.

-



once-daily GLP-1 tablet, Rybelsus





after the discovery of the molecule. Our Research

& Development (R&D) colleagues are also pursu-



demonstrated the potential of semaglutide 2.4 mg

in the STEP phase 3 clinical trial programme.



platforms and expanded our research into

adjacent disease areas in 2020 including

cardiovascular disease, non-alcoholic



– areas of huge unmet medical need and a great

burden for patients, families and society alike.

Our continued focus on external innovation



Therapeutics and Emisphere Technologies,

strengthening our positions in cutting-edge areas

of cardiovascular medicine and drug delivery

respectively.









leadership position in the diabetes market in terms

of value, keeping us on track to reach a share

of more than one third by 2025. Diabetes sales



Ozempic

and Rybelsus



market conditions for insulins. We continued to









haemophilia products.

I believe that our ability to meet the needs of our

millions of patients during the pandemic in 2020

comes as a consequence of our crystal-clear

purpose and long-established company values. We

are far from done and have many more millions





our people and in our organisation, creating an













recovery from the pandemic.





during this most challenging of years. Special thanks





goes to our Board of Directors for their continued

support and constructive challenging of the organ-



our shareholders for their continuous support.

Lars Fruergaard Jørgensen



“Over the past year we have

stepped up our commitment

to our purpose by launching

a new Defeat Diabetes social

responsibility strategy. This

sets out our ambition to

accelerate the prevention

of type 2 diabetes, provide

access to aordable care for

vulnerable patients in every

country and innovate to

improve lives."



and is enrolled in our Changing Diabetes

in Children programme, Ivory Coast

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 6

126,946

54,126

28,565

45,323

169

DKK million in net sales













Our corporate strategy

Our corporate strategy has four distinct focus



purpose, the Novo Nordisk Way and our ambition

to be a sustainable business.

We aim to strengthen our leadership and

treatment options in Diabetes and Obesity care,



establish a strong presence in other serious

chronic diseases such as NASH, cardiovascular dis-





Diabetes care

Strengthen leadership



medicines and driving

patient outcomes

Other serious

chronic diseases

Establish presence by

building competitive pipeline



Obesity care

Strengthen treatment options

through market development



medicines and driving

patient outcomes

Biopharm

Secure a leading position

by leveraging full portfolio

and expanding into

adjacent areas

Driving change to

defeat diabetes

and other serious

chronic diseases

Novo Nordisk is a global healthcare company,

headquartered in Denmark. Our key contribu-

tion is to discover and develop innovative bio-

logical medicines and make them accessible





Novo Nordisk

at a glance

463



650



450



haemophilia

1. IDF Diabetes Atlas, 9th edition, 2019



3. World Federation of Hemophilia, Annual

Survey, 2018

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 7

Value

Value created from our



– 32.8 million people using

our Diabetes care products

– 43,500 patients participating

in our clinical trials

– 45,323 employees, 



– 60,000 direct suppliers

– 26,376 DKK million total tax

contribution

– 36,976 DKK million to

shareholders as dividends

and share repurchases

Resources

Resources going into our





– Insights from healthcare

experts, patients and

partners

– Expertise from public and

private institutions

– Diverse talent



– Financial resources

Delivering high-volume products

such as insulin and GLP-1, via an



Pioneering idea exploration



understanding of biology

Engineering and developing



chronic diseases

Executing commercially through



patient access

Manufacturing biologics





Our business

model



Driving change to defeat diabetes and other

serious chronic diseases. Our key contribution

is to discover and develop innovative biological

medicines and make them accessible to patients



We strive to be a sustainable business, creating

value to society and to our future business. We







create long-term value to patients, employees,

partners, shareholders and society.

Novo Nordisk Annual Report 2020 / 8Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Strategic

Aspirations 2025

Performance highlights

Purpose and sustainability

2025 Strategic Aspirations

– Being respected for

adding value to society



environmental impact

– Ensure distinct core

capabilities and evolve

culture

2020 highlights

Adding value to society:



Defeat Diabetes



– Societal contributions during COVID-19



76 countries

Environment:



sites

– Launch of supplier target aiming at 100%



Ensure distinct capabilities and evolve culture

– Progress on diversity and inclusion agenda as



2020 highlights

Diabetes sales increased by 8% at CER

– Value market share leadership expanded by

0.7 percentage points to 29.3%

Obesity sales increased by 3% at CER to

DKK 5.6 billion

Biopharm sales increased by 1% at CER

2025 Strategic Aspirations

– Strengthen diabetes

leadership – aim at

global value market

share of more than 1/3

– Strengthen obesity

leadership and double

2019 reported sales

– Secure a sustained



Biopharm

Commercial execution

2020 highlights

Diabetes:

– Semaglutide 2.0 mg phase 3b trial

successfully completed



programme initiated

– Rybelsus

approved in the EU, the UK

and Japan

Obesity:

– Applications for semaglutide 2.4 mg

submitted to FDA and EMA

– AM833 + semaglutide 2.4 mg phase 1 trial

successfully completed

Biopharm:

– Mim8 phase 1/2 trial initiated

– Concizumab phase 3 trial reinitiated

Other serious chronic disease:

– Successful completion of phase 2 trials for

ziltivekimab and semaglutide in NASH

2025 Strategic Aspirations

– Further raise the

innovation bar for

diabetes treatment

– Develop a leading

portfolio of superior

treatment solutions for

obesity

– Strengthen and progress

the Biopharm pipeline

– Establish presence in

other serious chronic

diseases focusing on

cardiovascular disease

(CVD), NASH and chronic

kidney disease (CKD)

Innovation and therapeutic focus

2020 highlights

Operating prot increased by 7%

at CER to DKK 54.1 billion

Sales increased by 7% at CER, to

DKK 126.9 billion







US sales transformed to products launched

since 2015

Free cash ow of DKK 28.6 billion and

DKK 37 billion returned to shareholders

2025 Strategic Aspirations

– Deliver solid sales and



– Deliver 6–10% sales



– Transform 70% of

sales in the US (from

2015 to 2022)

– Drive operational



value chain to enable

investments in future





enable attractive capital

allocation to shareholders

Financials

To reect the broad aspects of Novo

Nordisk across therapy areas and

geographies, Novo Nordisk introduced in

2019 a comprehensive approach describing

the future growth aspirations of the

company under the headline Strategic

Aspirations 2025. The Strategic Aspirations

are objectives that Novo Nordisk intends

to work towards and are not a projection

of Novo Nordisk's nancial outlook or

expected growth.







Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 9

Financial

highlights

Sales by therapeutic area

Diabetes care Obesity care Biopharm

81%

48%

27%

11%

14%

15%

Sales by geographic area

North America EMEA

Region China Rest of World

Performance highlights

DKK million 2016 2017 2018 2019 2020 2019–2020

Financial performance Change

Net sales 111,780 111,696 111,831 122,021 126,946 4%

 3.6% (0.1%) 0.1% 9.1% 4.0%



5.5% 2.3% 4.6% 5.6% 6.7%

 48,432 48,967 47,248 52,483 54,126 3%

 (2.0%) 1.1% (3.5%) 11.1% 3.1%



0,2% 4.8% 2.8% 5.6% 6.8%

Depreciation, amortisation and impairment losses 3,193 3,182 3,925 5,661 5,753

 (634) (287) 367 (3,930) (996)

 47,798 48,680 47,615 48,553 53,130 9%



20.7% 21.7% 18.9% 19.8% 20.7%

 37,925 38,130 38,628 38,951 42,138 8%

Purchase of intangible assets

1,199 1,022 2,774 2,299 16,256 607%

Purchase of property, plant and equipment

7,068 7,626 9,636 8,932 5,825 (35%)



39,991 32,588 32,536 34,451 28,565 (17%)

Total assets 97,539 102,355 110,769 125,612 144,922 15%

Equity 45,269 49,815 51,839 57,593 63,325 10%

Financial ratios

Gross margin

84.6% 84.2% 84.2% 83.5% 83.5%

Sales and distribution costs in percentage of sales 25.4% 25.4% 26.3% 26.1% 25.9%

Research and development costs in percentage of sales 13.0% 12.5% 13.2% 11.7% 12.2%

Operating margin

43.3% 43.8% 42.2% 43.0% 42.6%



33.9% 34.1% 34.5% 31.9% 33.2%

Cash to earnings

105.4% 85.5% 84.2% 88.4% 67.8%



150,2% 143,2% 116,7% 98,0% 82.8%

Dividend payout ratio

50.2% 50.4% 50.6% 50.5% 50.0%

Share performance

Basic earnings per share/ADR in DKK

14.99 15.42 15.96 16.41 18.05 10%

Diluted earnings per share/ADR in DKK

14.96 15.39 15.93 16.38 18.01 10%

Total number of shares (million), 31 December 2,550 2,500 2,450 2,400 2,350 (2%)

Dividend per share in DKK 7.60 7.85 8.15 8.35 9.10

Total dividend (DKK million) 19,048 19,206 19,547 19,651 21,066

Share repurchases (DKK million) 15,057 16,845 15,567 15,334 16,855 10%

Closing share price (DKK) 255 335 298 387 427 10%





Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 10

Financially

responsible

Socially

responsible

Environmentally

responsible

2025 Strategic Aspirations

Purpose and

sustainability

– Being respected for

adding value to society



environmental impact

– Ensure distinct core

capabilities and evolve

culture

Driving change to

defeat diabetes

and other serious

chronic diseases

Purpose and sustainability

Adding value to society

and to our future

business

Demands on companies are changing fast as the world is faced with

extraordinary challenges. Threats like the COVID-19 pandemic and

climate change mean that 'business as usual' is no longer an option.

The stakes are high and we are determined to be a sustainable

business by adding value to society and to our future business.

The rapid outbreak of COVID-19 during 2020 put





the spotlight. At the same time, climate change

remains an urgent challenge. These challenges call

for corporations to step up and take a leading role

in delivering and adopting solutions.



increasing access to our medicines across the







Responding to COVID-19

During 2020, COVID-19 led to a cascade of critical

-

tise, resources and global reach to contribute to



the safety of our employees and the uninterrupted

supply of life-saving medicines for our patients. In



-

search and development organisation to perform



from the Danish government.

Leading a sustainable business

Our purpose is to drive change to defeat

diabetes and other serious chronic diseases.



solutions beyond providing medicines to help



in non-communicable diseases, lack of access to



We are committed to being a sustainable business.



to our future business. To achieve this ambition,





Articles of Association and the Novo Nordisk Way.

This approach is integrated into every aspect of

our decision-making, in strategies and actions,















Governance – means to us.



and in the consolidated ESG statement.

Novo Nordisk Annual Report 2020 / 11Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Purpose and sustainability

Our

environmental

responsibility



designing products that can be re-used or

recycled, reshaping our business practice to





We call our environmental strategy Circular for





for Zero strategy incorporates our entire value



circular company and circular products.

Circular supply





Our environmental strategy,

Circular for Zero and 2030

ambitions

Circular supply:



to embed circular thinking for reduced

environmental impact across the value



sourcing and procurement

Circular products:



based on circular principles and solve the



close the resource loop

Circular company:

Eliminate environmental footprint from

operations and drive a circular transition

across the company aiming for zero

environmental impact

Each year, billions of Novo Nordisk tablets,

vials and injection pens are distributed to

patients and demand for them is growing.

This puts us in the front line of some

of the most challenging environmental

issues including climate change, water

and resource scarcity, pollution and plastic

waste. Our ambition is bold and simple: to

have zero environmental impact.

suppliers to encourage them to shift to sustainably

sourced materials, thus reducing our environmen-



-









result in around 300,000 tonnes of CO

being elim-

inated from our direct suppliers each year.

Circular company



impact across all areas of our operations and

transportation. In 2020, total CO

emissions across



tonnes of CO

, representing a 44% decrease from

2019, due primarily to the implementation of



from COVID-19.

emissions from operations includes all



and laboratories. In 2020, CO

emissions from



, a reduction

of 57% versus 2019, primarily due to the



initiatives. These projects include implementation











a decrease of 38% versus 2019, due primarily to



Due to COVID-19, CO

emissions from business



, a





from business travel are minimised through



colleagues and stakeholders. CO

emissions from







result of COVID-19. Novo Nordisk is a member

of EV100 and has committed to transitioning to

100% electric company cars by 2030. In 2020,



61,000 tonnes CO

, a decrease of 24% compared



products shipped from air to sea freight.

-

-







Novo Nordisk Annual Report 2020 / 12Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

It is our ambition to have zero

environmental impact. In order to





60,000





2030

300,000

tonnes of CO



from our direct suppliers each year.







In 2020, the energy consumption for our opera-

-

-

tion site in North Carolina. Energy-saving projects



expected to result in annual savings of 94,000 GJ.



3,368,000 cubic meters, an increase of 7% compared



Carolina. Four production sites including China and



seasonal variations. These sites accounted for 11%



consumption at these sites decreased by 15% in





across these sites.





by 2030. In 2020, production sites had a total





increased production in Kalundborg.



recycled, converted to biogas or incinerated in





Environmental performance

170

1,000 tonnes CO

emissions from

operations and transport

-44% from 2019

100%



for production sites

+24 percentage points from 2019





0% change from 2019

Circular products







the environmental footprint of our devices.



address the end-of-life challenges associated







in the future. Through recycling our production



recycle insulin pens, providing materials for the



are pursuing greater re-use and recycling of our

devices and aspire to achieve this in coming years.

“The Danish Association of Pharmacies is

very excited to be part of this important

take-back project aiming to reduce the

environmental impact from used insulin

pens, which consist of valuable materials

suitable for recycling. By recycling we avoid

the negative climate impact from burning

the material as normal waste.”

– Birthe Søndergaard, Danish Association of Pharmacies

Read more about our environmental performance

in the consolidated ESG statement in this report

and on novonordisk.com.

Novo Nordisk Annual Report 2020 / 13Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

We are driving change to

Defeat Diabetes by…

Purpose and sustainability

Our social

responsibility

At Novo Nordisk, it is our ambition to be

respected for adding value to society. We

aim to achieve this by adding value to the

communities we are part of, delivering

innovative solutions to patients, and by

oering an inclusive, diverse, safe and

ethical workplace.





one in nine by 2045 if action is not taken

. Diabetes





and other partners to prevent and treat the



responsibility strategy, Defeat Diabetes, to help

society rise to one of its biggest challenges. We





Innovation

Our key contribution is to discover and develop

innovative biological medicines and make them







up 9% from 2019.

Read more in the section on innovation and

therapeutic focus.

Access and aordability









our diabetes medicines. Ensuring access and













of fast-acting (Novolog

) and premix insulin

(Novolog

Mix) at a 50% list price discount

versus branded versions



Novo Nordisk insulin products (up to three vials



patients





eligibility criteria, including annual household





during COVID-19



national pharmacies, including Walmart and CVS



immediate supply of Novo Nordisk insulin (up to

3 vials or 2 packs of pens) to eligible patients at

risk of rationing



out-of-pocket costs for commercially insured

patients.





We also recognise that there are vulnerable

patients in every country and to identify these















Vulnerable patient groups include people impact-

ed by humanitarian crises, people living in remote

-

cient healthcare systems and vulnerable popula-

tion groups, such as children and the elderly.







4 to USD 3 per human insulin vial in 76 countries.



…accelerating prevention

to bend the curve…

…providing access to aordable

care for vulnerable patients in

every country…

…innovating

to improve lives.

1. IDF Diabetes Atlas, 9th edition, 2019

Novo Nordisk Annual Report 2020 / 14Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

We expanded our Changing

Diabetes in Children programme



100,000

children by 2030.

222

clinics

established.

28,296

children reached

in 14 countries.



by the World Bank, and middle-income countries in





organisations.





2020, the average price of insulin sold under this



to 11.6 cents per patient per day. Beyond this



the ceiling price in other countries, reaching an

estimated another 3.1 million people during

2020. Our Access to Insulin Commitment is only

one element and it cannot stand alone. Supply

chain improvements and capacity building are





Read more about our Access to Insulin

Commitment on novonordisk.com.





the International Committee of the Red Cross

(ICRC) and the Danish Red Cross (DRC), aimed





an ambition that no child should die from type





the aim of reaching 100,000 children by 2030.



In total, 469 healthcare professionals have been

trained, 222 clinics established and 28,296 children

across 14 countries have received care as part of

the programme since 2009.

Prevention

In addition to the impact on patient lives, diabetes

also constitutes one of the biggest societal chal-



-



-



early interventions and health inequalities in cities.





obesity in Mexico and Colombia is progressing

despite COVID-19, and global advocacy on

childhood malnutrition continues.



private partnership, Cities Changing Diabetes,



treatment amongst vulnerable populations in

urban settings. In 2020, Cities Changing Diabetes

reached 36 cities, up from 25 in 2019, spanning



partners across the public and private sectors.

Donations and other contributions





– 165 DKK million to the Antimicrobial Resistance

Research (AMR) Action Fund, the largest

collective fund ever established to support vital

research into antimicrobial resistance research

and development

– 138 DKK million to the World Diabetes



contribution of 50 DKK million in 2020

– 20 DKK million to the Novo Nordisk Haemophilia

Foundation

Helping society respond to COVID-19



have been focused on helping society.



supported the Danish healthcare system in

increasing national testing capacity and developed



the University of Copenhagen to study the virus.

-



including UNRWA and the Red Cross Organisa-





Employees







opportunities to realise their potential.

At the end of 2020, the total number of



1. Categorised as an equity investment

and therefore not expensed in the income

statement

Novo Nordisk Annual Report 2020 / 15Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information







Diversity and inclusion

To deliver on our Strategic Aspirations it is crucial

to have an inclusive and diverse organisation at

all levels, including our Board of Directors. We

fundamentally believe that diversity of people and

inclusive leadership drive value for Novo Nordisk.

One element of our diversity and inclusion

aspiration is to achieve a balanced gender

representation at all managerial levels. While

several initiatives have been launched to

accelerate diversity and inclusion and drive gender

balance, there has only been gradual change and







in 2019. In Senior Management









To accelerate diversity and inclusion and ensure

accountability for driving progress, all levels

throughout the organisation have implemented

local action plans during 2020. In addition, in

2020 diversity and inclusion has been anchored in

both short- and long-term incentive programmes.

The strong stance on diversity and inclusion



continuous progress from the local action plans.

Human rights and labour



to respect human rights, including labour rights

across all our activities and business relationships

as a minimum standard of business conduct.

Read more about our Human Rights Commitment

on novonordisk.com.







to ensure that all our employees are paid a living



services necessary to achieve a basic standard of







2019, and as a result of this analysis an action plan

has been implemented.

Read more about our Global Labour Code of

Conduct for labour rights on novonordisk.com.



salient human rights issues beyond those already

addressed by existing global standards and

programmes. In 2020, manager and employee





human rights and all company operations. In 2020,









health, see progress above.

To mitigate risks of exploitation of human

biosamples used in pre-clinical research and





strengthened risk-based due diligence process.



enhanced human rights due diligence





the human rights focus of our supplier audits,

by updating the auditor toolbox and conducting



Read more about our due diligence on modern

slavery risks on novonordisk.com.

Health and safety and accident reporting

Safety behaviour is part of our company values. In

2020, the average frequency rate of occupational









committed to continuously improving safety

performance.

Read more about our social performance in the

consolidated ESG statement in this report and on

novonordisk.com

Social performance

32.8



Diabetes care products

+9% from 2019

158

million in donations to World Diabetes

Foundation and Novo Nordisk

Haemophilia Foundation

+50% from 2019

45,323



+5% from 2019



Senior Vice Presidents

Novo Nordisk Annual Report 2020 / 16Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Essentials,

part of the Novo Nordisk

Way

1 We create value by having

a patient centred business

approach.

2 We set ambitious goals and

strive for excellence.

3 We are accountable for our



social performance.

4 We provide innovation to the



5 We build and maintain



stakeholders.

 

respect.

7 We focus on personal

performance and

development.

8 We have a healthy



environment.

9 We strive for agility and



10 We never compromise on

quality and business ethics.

Purpose and sustainability

Governing

sustainable

business

In Novo Nordisk, sustainability

considerations are integrated into our

business, decision-making and governance

structures. We strive to conduct our

business in a responsible manner, in

accordance with the Novo Nordisk Way – a

set of guiding principles which underpins

every decision we make.

Novo Nordisk Way

The Novo Nordisk Way is a set of guiding principles





facilitation to ensure that everyone lives up to

the Novo Nordisk Way. In 2020, 26 facilitations



to COVID-19 travel restrictions. Any issues are

addressed locally, and consolidated insights are



of Directors. The Novo Nordisk Way also underpins

our performance management and incentive

programmes.





acceptance of discrimination nor harassment.

We have processes in place to encourage the

reporting of any discrimination, harassment or

retaliation, including an anonymous reporting

hotline. We encourage all managers and

employees to have an open dialogue on the

matter.

Company trust

The level of trust in Novo Nordisk among key



practitioners and diabetes specialists – is an





Our trust score, measured on a scale of 0-100,

increased to 80.6 in 2020 from 78.2 in 2019. The



in a trust score in the pharmaceutical industry in

2020.

Business ethics

Our approach to business ethics is about acting



Nordisk Way, our Business Ethics Code of

Conduct and international and local standards

for responsible business conduct. Business

ethics covers anti-bribery and anti-corruption,



of minimising any potential risks to our business,

people and society.

Annual training in business ethics is mandatory



99% of employees completed and documented



mainly due to employees being on leave. In 2020,







reported to our Executive Management and the

Audit Committee.

During COVID-19, all audits outside Denmark



approach for 2020, Group Internal Audit assesses

that the level of business ethics compliance is

sound. Management action plans and closure of





end of the year.





ensure responsible and sustainable use of data.

Furthermore, data protection and human rights



ethics risk reporting process in 2020.

Product quality and supplier audits

-

tions among those resolved at year-end. During

-





inspection reports had not been received or the

Novo Nordisk Annual Report 2020 / 17Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Corporate income taxes by region – three year average

Share of category

Region

Intellectual

property rights

Production

Sales

Corporate

income taxes

(DKK billion)

International Operations

8.4

– Denmark

7.2

– EMEA (excluding Denmark)

0.9

– China

0.2

– Rest of World

0.1

North America Operations

1.5



1.4

Total 9.9

Roshni has type 1 diabetes

and lives in India



2. Production based on production employees in the region

3. Sales based on the location of the customer



on unresolved inspections continues in 2021.







related to quality audits regarding handling of





been closed satisfactorily.





Corporate governance



sustainable business is integrated into our



supports the overarching imperative to be both

commercially successful and responsive to the





stock listing enables us to embark on long-



transparency on performance.

The objective of the Novo Nordisk Foundation is

to provide a stable basis for the commercial and

research activities of Novo Nordisk and support



purposes.

In addition to managing our business, our

governing bodies set direction and ensure

that sustainability is implemented in business









Read more about our corporate governance in

the corporate governance section of this report.

Remuneration

The variable remuneration of executives is





sustainable business.

Read more about the remuneration of our

executives in the corporate governance section

of this report.

Sustainable tax approach



sustainable tax approach (tax policy), emphasising

our commercial approach to managing the impact



operating our business in a responsible and





respecting international and domestic tax rules.



-

ulations. We apply a 'Principal structure' in line



perform their functions on contract on behalf of

the principals and are allocated an activity-based

-

gin. The tax outcome of this operational model



our corporate income taxes by region. To ensure





Advance Pricing Agreements in place for geogra-

phies representing more than 65% of our revenue



Our sustainable tax approach has been approved

by the Board of Directors. Read more about our

sustainable tax approach on novonordisk.com.



other taxes. Please refer to 'total tax contribution'

in the ESG statement.

Novo Nordisk Annual Report 2020 / 18Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

We adhere to international standards,

commitments and recommendations,

including those outlined below:

– Access to Medicines Index

– CDP

– Sustainability Accounting Standards Board

– Task Force on Climate-Related Financial

Disclosures

– UK Bribery Act

– UK Modern Slavery Act

– UN Global Compact Ten Principles

– UN Guiding Principles on Business

and Human Rights

– UN Political Declaration on Universal

Health Coverage

– UN Sustainable Development Goals

– US Foreign Corrupt Practices Act

For more information, see

novonordisk.com.

Governance performance

facilitations of the Novo Nordisk Way

conducted

6 fewer than in 2019

80.6

company trust level

+3% from 2019



conducted

2 fewer than in 2019

177

supplier audits

59 fewer than in 2019

Financial and ESG assurance







General Meeting. As part of our ESG responsibility,



an independent external auditor for ESG report-

ing in the annual report. The assurance provider



covers aspects that are deemed to be material



information reported.

Our internal audit function provides independent and







operates independently of Executive Management,

its charter, audit plan and budget are approved by

the Audit Committee. The Audit Committee must ap-

prove the appointment, remuneration and dismissal

of the head of the internal audit function.

Read more about our corporate governance in

the corporate governance section of this report.

Materiality

We have a robust materiality process in place



reassessed on an annual basis by management.

The three most material risk factors that can

impact our ability to create value over time are



– Product quality and patient safety

– Progress in the R&D pipeline and regulatory

approval

– Pricing and market access environment

Read more in the risk management section of

this report.

Sustainability standards and performance

We strive to report on our ESG performance in



One of these is the Taskforce on Climate-related





related disclosures into our annual report. A





in our CDP disclosure report. As recommended





Agreement Goal (Representative Concentration



emission (RCP 8.5) RCP to identify short-, medium-



supply chain to ensure a steady supply of medicine

to patients.

We strive to adhere to the disclosures of the Social



apply to our industry. We do this to demonstrate

our commitment to being transparent and







For the United Nations Sustainable Development



'health' and Goal 12, 'responsible consumption



maximise our positive impact on the SDGs.

Read more about our sustainability governance in

the consolidated ESG statement in this report and

on novonordisk.com.

Novo Nordisk Annual Report 2020 / 19Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Innovation and therapeutic focus

Prioritising a pipeline

of hope for serious

chronic diseases

For almost a century, Novo Nordisk has

pioneered scientic breakthroughs within

serious chronic diseases. To ensure that we

continue to deliver value to society, we are

pursuing even higher levels of innovation,

across more therapy areas and technology

platforms and with more patients and

partners than at any point in our history.



has never been more important. The COVID-19

pandemic has highlighted the vulnerability of



obesity and other serious chronic diseases,

underlining the urgency of addressing their unmet

medical needs.

We are rising to the challenge by building on a

successful track record in diabetes to pursue





as expanding our therapy area focus. These



protein and peptide engineering, but on novel

technology platforms including oral delivery of

biologics, stem cells, RNA interference (RNAi) and

gene editing to further advance our innovative

pipeline for long-term success.

Shifting gears for future growth

Our Research & Development (R&D) strategy is

driven by targeted investment in novel products

and technology platforms, resulting in higher

levels of innovation across more therapy areas



in our near 100-year history. In an increasingly

competitive biopharmaceutical industry, this





innovations that are set to transform medicine in

the 21

century.



developed one novel product each year and our





investments in near- and mid-term opportunities.

By building on our core capabilities including

our clinical trial expertise, large scale protein

manufacturing base and commercial excellence,



in future years.

-

pating in our clinical phase one to four trials – more

than at any point in our history. And, despite the

disruption caused to society and healthcare sys-



of key clinical trials through remote monitoring of

patients and by distributing trial products directly





included European and Japanese approvals for

Rybelsus



based medicine in a tablet – strengthening our

leadership position in diabetes. The once-daily

treatment represents a major technological





2025 Strategic Aspirations

Innovation and

therapeutic focus

– Further raise the

innovation bar for

diabetes treatment

– Develop a leading portfolio

of superior treatment

solutions for obesity

– Strengthen and progress

the Biopharm pipeline

– Establish presence in

other serious chronic

diseases focusing on

cardiovascular disease,

NASH and chronic kidney

disease

August and Marie Krogh brought insulin, a breakthrough



Insulinlaboratorium subsequently commercialised the production

of insulin.

Novo Nordisk Annual Report 2020 / 20Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Raising the bar in diabetes research



projected to increase from 463 million today to

700 million in 2045

, there remains an urgent



treatments. This includes novel forms of insulin, a

molecule discovered 100 years ago in 1921. One











insulins.



developing mono- and combination therapies that









trial to establish the safety of a glucose-sensitive

insulin candidate. We hope that such a treatment

-

curring insulin by sensing and responding to blood

sugar levels in the body. Furthermore, together



continuing to progress the development of sys-

tems enabling the oral delivery of macromolecules,

including the tortoise shell-inspired, self-orienting



one day delivering insulin in a tablet.

Shaping the future of obesity treatment

We are also playing a leading role in discover-



universally recognised as a serious chronic and

progressive disease. This is despite the fact that



risks, from cancer, type 2 diabetes and heart

disease to severe illness or complications from













-



using a treatment policy estimand). By leveraging

-







treatment options and bariatric surgery by using

combination therapies based on our peptide

innovation.

Semaglutide – also the active ingredient in Ry-

belsus

and Ozempic



trend in medicine in the form of a more holistic

approach to cardiometabolic diseases. The close



cardiovascular disease, chronic kidney disease and

non-alcoholic steatohepatitis (NASH) means that

the classical siloed approach to treating disease



molecule like semaglutide can potentially target a



Other serious chronic diseases

As a result, semaglutide is becoming a pipeline of





and obesity, a recent phase 2 trial involving





percentage of patients achieving NASH resolution

compared to placebo and could potentially play

a key role in preventing disease progression.

Furthermore, early-stage research supports

investigating semaglutide as treatment for early

Alzheimer's disease. A pivotal phase 3 programme





scientist's dream, our long-term innovation for the





into areas of medicine that build upon our

core capabilities. In cardiovascular therapy, this

includes several approaches, including an anti-

IL6 monoclonal antibody and a PCSK9 peptide-







just completed phase 1 studies.

1. IDF Diabetes Atlas, 9th edition, 2019

Novo Nordisk Annual Report 2020 / 21Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Harnessing external innovation

The acquisition in 2020 of US-based biotech

company Corvidia Therapeutics further

strengthens our pipeline by introducing the

anti-IL-6 monoclonal antibody, ziltivekimab,





atherosclerotic cardiovascular disease and chronic

kidney disease.



our ambition to establish a leading presence









technologies that enable the oral formulation

of therapeutics – including the Eligen

SNAC

technology found in Rybelsus



of external partners and investing in novel

technology platforms – including stem cell

research, RNA-interfering (RNAi) therapeutics and



a broader range of serious chronic diseases than

ever before. These technologies are revolutionising



the disruptive innovations of the future.

Progressing the Biopharm pipeline

External innovation is also playing an important

role in the evolution of our Biopharm business, a

speciality care unit that encompasses treatments

for rare blood and rare endocrine disorders,



includes Mim8 – a next generation treatment for

haemophilia A, concizumab for the treatment of







pioneering the development of next-generation

in vivo genome editing treatments for genetic

diseases, including haemophilia.

Looking to the future

Our investment in stem cell-based, regenerative

therapies lays the foundation for additional



disease, dry age-related macular degeneration

and chronic heart failure. Not to mention stem



to curing type 1 diabetes – an aspiration at the

heart of our purpose to defeat diabetes and other

serious chronic diseases.

One thing common to our entire innovation

strategy is a drive to maximise the potential of



invested in throughout 2020 via recruitment and

external collaboration. It is increasingly clear

that excellence in digital science, just as much



in biopharmaceutical R&D in the 21

century, as



move data-driven discovery to centre-stage in the





Novo Nordisk Annual Report 2020 / 22Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Innovation and therapeutic focus

Research and development

Diabetes

Regulatory events

– The oral glucagon-like peptide 1 (GLP-1) analogue in a

tablet, Rybelsus





diabetes (T2D).

– In China, a label expansion for Victoza



to include a cardiovascular (CV) indication based





Products Administration for semaglutide and the

insulin degludec/liraglutide combination.

Clinical progress

– The phase 3b trial, SUSTAIN FORTE, completed

successfully, demonstrating superior reduction in









 



artery disease.

 -



 -





 

successfully completed.

 



and a DNA immunotherapy for T1D.

Obesity

Regulatory events







marketing authorisation application for semaglutide



Medicines Agency.

– The submissions are based on the results from









-













– Saxenda







Clinical progress

– Novo Nordisk announced successful headline results





obtained in a phase 2 AM833 monotherapy trial and

a phase 1b combination trial of AM833 and once-



Biopharm

Regulatory events





Sogroya





Committee for Medicinal Products for Human Use

(CHMP) opinion for Sogroya



in Europe.

Clinical progress

– The phase 2 proof-of-concept study (Explorer 4)



inhibitors completed successfully. The halted phase



investigating sc concizumab prophylaxis treatment in

haemophilia A and B patients regardless of inhibitor

status.

 



antibody for sc prophylaxis in haemophilia A patients

regardless of inhibitor status. After successful

single-dose administration (phase 1), Mim8 entered

multiple-dose administration (phase 2).

– A phase 1 trial for EPI-01 in sickle cell disease

completed successfully.

Other serious chronic diseases

Clinical progress

– The phase 2 trial investigating daily, sc semaglutide in



-

through therapy designation in the US. Phase 3a initia-



– Novo Nordisk and Gilead Sciences presented results

from a phase 2 proof-of-concept trial in NASH. The







– Novo Nordisk acquired Corvidia Therapeutics Inc.,



clinical development. Ziltivekimab is a fully human

monoclonal antibody directed against interleukin-6













trial is expected to be initiated in 2021.

 





1. As add-on to metformin and/or sulfonylureas

Note: Details on clinical trials can be found in company announcements and press releases published by Novo Nordisk during 2020, available at novonordisk.com

Novo Nordisk Annual Report 2020 / 23Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Diabetes care

Project Indication Description Phase

Semaglutide 2.0 mg

NN9535

Type 2

diabetes



treatment.

Oral semaglutide HD

NN9924

Type 2

diabetes

A long-acting oral GLP-1 analogue, 25 and 50 mg,

intended for once-daily oral treatment.

Icodec

NN1436

Type 1 and

2 diabetes

A long-acting basal insulin analogue intended for



Insulin 965

NN1965

Type 1 and

2 diabetes

A novel basal insulin analogue intended for

once-daily treatment.

Icosema

NN1535

Type 2

diabetes

A combination of GLP-1 analogue semaglutide



FDC Sema – OW GIP

NN9389

Type 2

diabetes

A combination of semaglutide and novel GIP



Glucose-sensitive insulin

NN1845

Type 1 and

2 diabetes

A glucose-sensitive insulin analogue intended

for once-daily treatment.

Ideal Pump Insulin

NN1471

Type 1

diabetes

A novel insulin analogue ideal for use in a closed

loop pump device as delivery.

DNA Immunotherapy

NN9041

Type 1

diabetes

A novel plasmid encoding pre- and pro-insulin

intended for preservation of beta cell function.

Obesity care

Semaglutide 2.4 mg

NN9536

Obesity A long-acting GLP-1 analogue intended for



AM833

NN9838

Obesity A novel long-acting amylin analogue intended for



AM833 + semaglutide

NN9838

Obesity A combination of amylin analogue and GLP-1 analogue



LA-GDF15

NN9215

Obesity A long-acting GDF15 analogue intended for appetite



PYY1875

NN9775

Obesity A novel analogue of the appetite-regulating hormone,



Biopharm

Project Indication Description Phase

Sogroya

NN8640

Adult GHD

A long-acting HGH

derivative intended for



Somapacitan

NN8640

GHD

A long-acting HGH

analogue intended for



in children.

Concizumab

NN7415

Haemophilia



inhibitors

A monoclonal antibody against tissue factor



prophylaxis treatment.

Macrilen™



GHD

An oral diagnostic agent used for the diagnosis

of GHD in adolescents and children.

Mim8

NN7769

Haemophilia A



inhibitors



for subcutaneous prophylaxis of haemophilia A

regardless of inhibitor status.

Eclipse

NN7533

Sickle cell

disease

An oral combination treatment of sickle cell disease

and beta thalassaemia. Project is developed in



Other serious chronic diseases

Semaglutide

NN9931

NASH



treatment of NASH

Ziltivekimab

NN6018

CVD

A novel once-monthly monoclonal antibody

intended for inhibition of IL-6 activity.

PCSK9i peptide

NN6434

CVD

A long-acting PCSK9 inhibitor for subcutaneous

treatment.

Anti-ApoC3

NN5058

CVD

A novel monoclonal antibody intended for

inhibition of ApoCIII activity. Project is developed



Phase 1 Phase 2 Phase 3 Submission and/or approval





Innovation and therapeutic focus

Pipeline overview

Novo Nordisk Annual Report 2020 / 24Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Diabetes:

Key marketed products in main markets (active ingredients) US China Japan Germany

Human insulin Expired Expired Expired Expired

NovoRapid

(NovoLog

) Expired Expired Expired Expired

NovoMix

30 (NovoLog

Mix 70/30) Expired Expired Expired Expired

NovoNorm

(Prandin

) Expired Expired Expired Expired

Levemir

Expired Expired Expired Expired

Victoza

2023 Expired 2022 2023

Tresiba

2029 2024 2027 2028

Ryzodeg

2029 2024 2024

2028



2029 2024 2024

2028

Fiasp

(2030)

Ozempic

2032

2026 2031

2031

Rybelsus

2032

1,7

2026

2031

1,7

2031

Obesity:

Saxenda

2023 Expired Expired 2023

Biopharm:

Norditropin

(Norditropin



) Expired Expired Expired Expired

Sogroya

2034

2031 2036

2035

Macrilen

2027

N/A N/A N/A

NovoSeven

Expired

NovoEight

N/A N/A N/A N/A

NovoThirteen

(TRETTEN

) 2021 N/A Expired Expired



(REBINYN

) 2028

2022 2027

2027

Esperoct

2032

2029 2034

2034

Vagifem

10 mcg 2022

5,6

N/A 2021

N/A

1. Current estimate. 2. Patent term extension until 2027 may apply. 3. Formulation patent; active ingredient patent has expired. 4. Room temperature-stable formulation patent until 2023 in China, Japan



regimen are protected by additional patents expiring in 2031-2034. 8. Protects method of use and kits of parts.

Innovation and therapeutic focus

Patent status

for marketed

products

The patent expiry dates for the products are



provided are for expiry in the US, China, Japan

and Germany of patents on the active ingredient,





products, in addition to the active ingredient

patent, Novo Nordisk holds other patents on

manufacturing processes, formulations or uses

that may be relevant for exclusivity beyond

the expiration of the active ingredient patent.

Furthermore, regulatory data protection and/or

orphan exclusivity may apply.

Novo Nordisk Annual Report 2020 / 25Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

2025 Strategic Aspirations

Commercial

execution

– Strengthen diabetes

leadership – aim at a

global value market share

of 1/3

– Strengthen obesity

leadership and double

2019 reported sales



outlook for Biopharm

Commercial execution

Delivering innovation

to patients in the face

of a pandemic

Around the world, the number of people

living with diabetes and other serious

chronic diseases is growing fast and the

need to supply improved treatments

is critical. But ensuring that life-saving

medicines reach all those who require them

– from Stockholm to Shanghai and New

York to Nigeria – has demanded new ways

of doing business in 2020 as the COVID-19

pandemic has disrupted societies and

economies.

Despite the challenging backdrop provided by

the COVID-19 pandemic, our commercial teams



delivering innovation to patients. By harnessing









customers. This includes the successful roll-out of

Rybelsus

, our GLP-1 based medicine in a tablet.



of a global diabetes value market share of more

than one third by 2025, after expanding our value

market share by 0.7 percentage points to 29.3%



by the COVID-19 pandemic in 2020 but are also



the Biopharm division is building a platform for



A victory for agility











opportunity presented by the rise of digitisation

in healthcare and the challenge of ensuring





button on all these key activities, inspiring

colleagues to adapt and evolve business practices

faster than ever in 2020.

The crisis underscores the importance of





as they are subject to an increased risk of severe

symptoms and outcomes from COVID-19. With

millions of patients depending on us, failing to

meet their needs is simply not an option.

Embracing virtual interactions

Across the pharmaceutical industry the pandemic

has created an unprecedented commercial



medical innovations could no longer continue.



and doctors or companies and customers –

became almost impossible in many countries for



parts of our business, especially in the dynamic











communicating, by transitioning to virtual





virtual interactions, this involved making the

majority of our commercial materials digital and

shifting group presentations into a virtual setting

– a particularly popular approach in China. We also

moved our line-up of expert educational events to



of these virtually in 2020.

Novo Nordisk Annual Report 2020 / 26Introducing Novo Nordisk / Strategic Aspirations — Commercial execution / Corporate governance / Consolidated statements / Additional information





rise in the use of telemedicine across primary and

some secondary care in key markets including



international medical congresses from physical

to virtual platforms. Fortunately, the inability to





attend in person to participate remotely and learn



A leading portfolio of diabetes medicines





, our once





, our semaglutide-





products for type 2 diabetes (Victoza

, Ozempic

and Rybelsus

) increased by 25.9% in Danish

kroner and by 28.7% in constant exchange rates.











meaningful advances for patients, despite having

been in diabetes for nearly a century.











in the Medicare Part D Coverage Gap legislation.





Around the globe, the insulin market is becoming



commercial approach according to the needs of



our core strengths is a broad portfolio of products



Ozempic



countries

Rybelsus

countries

Diabetes value market share (%)

GLP-1 Insulin Diabetes

2018

2019 2020

46.2%

47.5%

43.6%

44.5%

27.8%

28.6%

29.3%

44.3%

50.4%



and Ryzodeg





pens. We are also adapting packaging to the



smaller pack sizes in out-of-pocket markets such





medicines.





patients a range of options to help. We invested









studying in high school and doing triathlons.

Novo Nordisk Annual Report 2020 / 27Introducing Novo Nordisk / Strategic Aspirations — Commercial execution / Corporate governance / Consolidated statements / Additional information





of the options available – including our Patient





healthcare coverage due to COVID-19.

Leading the way in obesity

Obesity is a serious chronic disease that is closely



a range of other health risks – from cancer and

heart disease to severe outcomes from COVID-19.







has been encouraging to see more governments –



taking steps during 2020 to recognise and address

obesity as a chronic disease. But there is still more





Sales of Saxenda® increased by 3.3% in constant









National Institute for Health and Care Excellence

(NICE) recommended Saxenda

for certain people





and is paid for out of pocket by patients. In

countries such as Brazil, Saudi Arabia and South





due to patients cutting personal spending as

the COVID-19 pandemic took hold. In the US,





initiating treatment.







aspire to transition from a single-product obesity



In the near term, this is expected to be driven by













transformative treatment for obesity.

Building in Biopharm

Sales of Biopharm products increased by 0.7%

in constant exchange rates and declined 1.3%







due in part to supply challenges for competing

products in some countries. Our haemophilia

medicine NovoSeven











Esperoct



The global burden of obesity

650

million adults have

obesity

124

million children and adolescents



Obesity sales

Sales as reported 

Biopharm sales

Sales as reported 



Denmark



2020





-

ulation-based measurement studies in 128.9

million children, adolescents, and adults (2017)





DKK

billion

2016 2017 2018 2019 2020

DKK

billion

2016 2017 2018 2019 2020

245%

4% 1%

-1%

-16%

60%

64%

42%

Novo Nordisk Annual Report 2020 / 28Introducing Novo Nordisk / Strategic Aspirations — Commercial execution / Corporate governance / Consolidated statements / Additional information

2025 Strategic Aspirations

Financials

– Deliver solid sales and



– Deliver 6–10% sales



Operations

– Transform 70% of sales

in the US (from 2015 to

2022)

– Drive operational



value chain to enable

investments in future





enable attractive capital

allocation to shareholders

Financials

2020 performance

and 2021 outlook

Financial performance

Sales increased by 4% measured in Danish

kroner and by 7% at CER to DKK 126,946 million























Technologies Inc. in the fourth quarter of 2020.

Geographic sales development

Sales in International Operations increased by 7%

measured in Danish kroner and by 10% at CER.



Sales in EMEA increased by 6% measured in Dan-

ish kroner and by 9% at CER. Sales in Region China

increased by 10% measured in Danish kroner and

by 11% at CER. Sales in Rest of World increased by

6% measured in Danish kroner and by 12% at CER.

Sales in North America Operations increased by

1% measured in Danish kroner and by 3% at CER.

In 2020, 48% of US sales came from products



70% by 2022.

Sales development across therapeutic areas







Diabetes and Obesity care

Diabetes care, sales development

Sales in Diabetes care increased by 5% measured

in Danish kroner and by 8% at CER to DKK 102,412



improved the global diabetes value market share

over the last 12 months from 28.6% to 29.3%,

driven by market share gains in both International

Operations and North America Operations.



market data are based on moving annual total

(MAT) from November 2020 and November 2019



Insulin

Sales of insulin decreased by 5% measured in

Danish kroner and by 3% at CER to DKK 56,550





International Operations.

Sales of long-acting insulin decreased by 11%

measured in Danish kroner and by 9% at CER to

DKK 18,439 million. Novo Nordisk has increased

its global volume market share in the long-acting

insulin segment from 32.4% to 32.8% in the last 12



driven by declining Levemir

and Tresiba

sales,



Tresiba





has been launched in 42 countries.

Sales of premix insulin increased by 3% measured

in Danish kroner and by 6% at CER to DKK 10,925

million. Novo Nordisk is the market leader in the



market share of 65.2% compared to 64.2% 12



increased sales of both Ryzodeg

and NovoMix

Ryzodeg



Financial performance

NAO net sales as reported IO net sales as reported



DKK billion

120

150

2016 2017 2018 2019 2020

Novo Nordisk Annual Report 2020 / 29Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

Sales of fast-acting insulin decreased by 5%

measured in Danish kroner and by 3% at CER to

DKK 18,313 million. Novo Nordisk is the market

leader in the fast-acting insulin segment and

has increased its global volume market share to

51.7% from 50.7% in the last 12 months. The sales





by increased Fiasp

sales. Fiasp



launched in 41 countries.

Sales of human insulin decreased by 2% measured

in Danish kroner and increased by 2% at CER to

DKK 8,873 million.

GLP-1 therapy for type 2 diabetes

Sales of GLP-1 products for type 2 diabetes

(Ozempic

, Victoza

and Rybelsus

) increased by

26% measured in Danish kroner and by 29% at

CER to DKK 41,831 million. Ozempic





21,211 million, and Rybelsus

has been launched





diabetes market has increased to 22.0% compared



continues to be the global market leader in the



an increase of 2.9 percentage points compared



impacted by COVID-19.

Obesity care, sales development

Sales of Saxenda

decreased by 1% measured in

Danish kroner and increased by 3% at CER to DKK

5,608 million. Saxenda









initiated treatment. Saxenda



launched in 55 countries. Novo Nordisk currently

has a value market share of 64.7% of the global

obesity prescription drug market.

Biopharm

Biopharm, sales development

Sales of biopharm products decreased by 1%

measured in Danish kroner and increased by 1%









by declining sales of NovoSeven





COVID-19.

Haemophilia

Sales of haemophilia products decreased by 6%

measured in Danish kroner and by 4% at CER



driven by declining NovoSeven





continued global roll-out of Esperoct



Sales of NovoSeven

decreased by 11% measured

in Danish kroner and by 9% at CER to DKK 7,203



declining sales in North America Operations, Rest



-



elective surgeries and bleedings due to COVID-19.

Sales of NovoEight

decreased by 4% measured

in Danish kroner and by 1% at CER to DKK 1,462





increased sales in Rest of World. The NovoEight



, the long-



been launched in 19 countries.



increased to DKK 518 million.







has

been launched in 25 countries.

Growth disorders (Norditropin

)

Sales of Norditropin

increased by 6% measured

in Danish kroner and by 8% at CER to DKK



International Operations increasing by 16%,



declining by 4% at CER. Novo Nordisk is the





36.0% compared to 33.0% a year ago, driven by







challenges for competing products in select

countries.

Sales by therapeutic areas

Diabetes care Obesity care

Biopharm 

DKK billion

120

150

2020201920182016 2017

Sales split in Diabetes care

Insulin sales as reported

GLP-1 sales as reported

Other diabetes 

DKK billion

100

2020201920182016 2017

6% 4%

2% 5%

Novo Nordisk Annual Report 2020 / 30Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

Development in costs and operating prot

The cost of goods sold increased by 4% measured

in Danish kroner and by 5% at CER to DKK 20,932

million, resulting in an unchanged gross margin

of 83.5% measured in Danish kroner compared



productivity improvements and a positive product

mix driven by increased GLP-1 sales. This is



realised prices in the US and a negative currency

impact of 0.3 percentage points.

Sales and distribution costs increased by 3%

measured in Danish kroner and by 6% at CER

to DKK 32,928 million. The increase in costs is



launch activities for Rybelsus

and continued

promotional activities for Ozempic





In International Operations, promotional spend

is related to launch activities for Ozempic

and

Rybelsus



Saxenda

. COVID-19 resulted in a reduction of the

activity level and delay of promotional activities.

Research and development costs increased by 9%

measured in Danish kroner and by 10% at CER to

DKK 15,462 million. The cost increase is driven by



semaglutide 2.4 mg in obesity in the third quarter



chronic diseases are driving the cost increase



cardiovascular disease and stem cell projects



cardiovascular outcomes trials, SOUL and SELECT.

Administration costs decreased by 1% measured in

Danish kroner and increased by 1% at CER to DKK



across administrative areas.





reduced royalty income.



Danish kroner and by 7% at CER to DKK 54,126

million.

Financial items (net) and tax





million in 2019.





Nordisk have been hedged, primarily through











of several emerging market currencies, partially



As per the end of December 2020, a positive



approximately DKK 1.8 billion has been deferred

for recognition in 2021. For more information see











a non-recurring increase to deferred tax assets.

Cash ow and capital allocation

Capital expenditure for property, plant and









pharmaceutical ingredients in Clayton, North



construction.





purchase of intangible assets of DKK 16.3 billion,

primarily related to the acquisitions of Corvidia

Therapeutics Inc. and Emisphere Technologies Inc.



billion by end of December 2020 comprising





Operating prot and margin







DKK billion

2020201920182016 2017

Cash ow and capital

allocation

Dividend for prior year

Interim dividend

Share repurchases



DKK billion

2021E

202020192017 2018

1. Expectations for 2021

Novo Nordisk Annual Report 2020 / 31Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

2021 outlook

The current expectations for 2021 are summarised

in the table named 'Outlook 2021' on this page.















driven by the GLP-1 products Ozempic

and

Rybelsus









Diabetes care, especially in the US, is expected to

negatively impact sales development. Given the

current exchange rates versus the Danish krone,









-

look and continued investments in current and



including the continued roll-out of Ozempic

and

Rybelsus



an anti-obesity market and the expected launch

of semaglutide 2.4 mg in the US. Furthermore, re-

sources are allocated to both early and late-stage

pipeline activities, including expected initiations

of several phase 3a clinical trial programmes in

2021. Given the current exchange rates versus





than at CER, mainly driven by the spot rate of the

USD being 615 versus an average of 654 in 2020.

The current COVID-19 pandemic causes

uncertainty to the outlook regarding the number

of patients initiating treatment and societal

impacts such as the unemployment rate in the



coverage. The outlook is based on a number of

assumptions related to the severity and duration

of impacts from COVID-19. Consequently, volatility

in quarterly results should be expected.



(net) to amount to a gain of around DKK 0.7 billion,





a hedging period of 11 months and associated

hedging costs.



the range of 20-22%.

Capital expenditure is expected to be around

DKK 8.0 billion in 2021, primarily relating to

investments in additional capacity for active

pharmaceutical ingredient (API) production at



The expected increase in capital expenditure



oral technology platform.

Depreciation, amortisation and impairment

losses are expected to be around DKK 6.0 billion.

The increase in depreciation, amortisation and





pharmaceutical ingredients in Clayton, North







acquisitions in 2020.

All of the above expectations are based on as-

sumptions that the global or regional macroeco-

-

ly change business conditions for Novo Nordisk

during 2021, including the potential implications

from major healthcare reforms, and that the cur-



Outlook 2021



Expectations are as reported, if not otherwise stated Expectations 3 February 2021

Sales growth

at CER 5% to 9%

as reported 

Operating prot growth

at CER 4% to 8%

as reported 

Financial items (net) Gain of around DKK 0.7 billion

 20% to 22%

Capital expenditure (PP&E) Around DKK 8.0 billion

Depreciation, amortisation and impairment losses Around DKK 6 billion

 DKK 36-41 billion

Novo Nordisk Annual Report 2020 / 32Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

remain at the current level versus the Danish kro-





transactions during the remainder of 2021.



in a number of invoicing currencies and, all other

things being equal, movements in key invoicing







Forward-looking statements



the US Securities and Exchange Commission (SEC),

including this statutory Annual Report 2020 and



the SEC in February 2021 in continuation of the



information released, or oral statements made,

to the public in the future by or on behalf of Novo



















– Statements of targets, plans, objectives or goals

for future operations, including those related



product development, product introductions



relation thereto,

– Statements containing projections of or targets

for revenues, costs, income (or loss), earnings

per share, capital expenditures, dividends,





– Statements regarding future economic

performance, future actions and outcome of

contingencies such as legal proceedings, and

– Statements regarding the assumptions

underlying or relating to such statements.



looking statements can be found under the





These statements are based on current plans,

estimates and projections. By their very nature,





Nordisk cautions that a number of important

factors, including those described in this Annual



materially from those contemplated in any







and economic conditions, including interest rate



failure of projects related to research and/or devel-

opment, unplanned loss of patents, interruptions

of supplies and production, product recalls, unex-

pected contract breaches or terminations, govern-

ment-mandated or market-driven price decreases

-

peting products, reliance on information technol-





liability and legal proceedings and investigations,

-

pretation 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,



to recruit and retain the right employees, failure to

maintain a culture of compliance and epidemics,

pandemics or other public health crises.







this Annual Report 2020, reference is made to the



this Annual Report 2020.



duty and undertakes no obligation to update or









Novo Nordisk Annual Report 2020 / 33Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

High

Impact

Likelihood

High



Key risks

An aggregated presentation of



and on the next page. Every six

months, our Board of Directors

and Executive Management re-





Heat map

Research and

Development Risks



and Safety Risks

Commercialisation Risks

IT Security Risks

Financial Risks

Legal and Compliance Risks

Risk

management

In order for us to become a sustainable

business, we must anticipate and adapt

to our surrounding environment to create

new strategic opportunities. Managing risks

rigorously and systematically is key in order

for us to create and protect value over the

short, medium and long term.

Addressing risks in our strategic planning:

Scenario and risk-thinking exercises are part of our

strategic planning process. They include analyses



and political developments that present risks or

opportunities for our business.

Access and aordability

In the short and medium term, access to



key challenge for patients in many parts of the



as healthcare systems struggle to provide quality



chronic diseases keeps rising. Ensuring access and











Digital disruption



more personalised treatment and better manage-

ment of diseases. This is an opportunity for us to

deliver more value to our stakeholders and help

patients live a life free from the limitations of their



-



and reliability risks. We strive to develop digital

-

ners. We also believe in the value of open innova-



Environmental risks

We are preparing for the risks and opportunities



recommended by the Task Force on Climate-



integrating climate change scenarios into our

risk management processes to identify short-,

medium- and long-term risks.

Human rights and labour risks

We take a proactive approach to integrating risk

management of human and labour rights into our





labour, bonded labour, child slavery and hazardous

child labour, can occur in every industry and sector.

We respect human rights as per the UN Guiding

Principles on Business and Human Rights.

Risk management process

A rigorous approach to enterprise risk management

helps the company protect and enhance the value

of our assets. We are continually exposed to risks

throughout our value chain – from early discovery



delivery of medicines to patients. Some risks are

inherent in the pharmaceutical industry, such as



R&D pipeline. Other risks, such as supply disrup-



-











Executive Management and the Board of Directors



months. This map is based on insights from man-

agement teams in the organisation and includes







For more information, see our Corporate

Governance report available on



-governance/recommendations-and-practices.html

Novo Nordisk Annual Report 2020 / 34Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Risk area Description Impact Mitigating actions

Research and

Development

Risks

Findings in pre-clinical and clinical activities,

regulatory processes or commercial product

planning leading to delays or failure of

products in the pipeline.







product candidates









Product Supply,

Quality and

Safety Risks

Disruption of product supply or quality

failures may compromise the health of

patients.

– Product shortages could have potential implications for patients





is not ensured





supply risk

– Regular quality audits of internal units and suppliers and annual

inspections by authorities document GMP compliance





Commercialisation

Risks

Market dynamics and geopolitical,

macroeconomic or healthcare crises

(e.g. pandemics) leading to reduced payer



– Market dynamics could impact price levels and patient access











IT Security Risks Disruption to IT systems, such as cyber-

attacks or infrastructure failure resulting

in business disruption or breach of data



– Could limit our ability to produce and safeguard product quality



– Could limit our ability to maintain operations

– Could limit future business opportunities if proprietary information

is lost

– Protection mechanisms in IT systems and business processes



– Continuity plans for non-availability of IT systems



Financial Risks 

tax authorities and changes to tax legislation

and interpretation. Our foreign exchange





income and balance sheet



higher-than-expected tax level

– Hedging for selected currencies

– Integrated treasury management







more than 65% of sales

Legal and

Compliance Risks

Breach of legislation, industry codes or

company policies. Competitors asserting

patents against Novo Nordisk or challenging

patents critical for protection of commercial

products and pipeline candidates.

– Could expose Novo Nordisk to investigations, criminal and civil

sanctions and other penalties

– Could compromise our reputation and the rights and integrity of

individuals involved

– Unexpected loss of exclusivity for or injunctions against existing and

pipeline products could have an adverse impact on future sales



– Business Ethics Code of Conduct and compliance hotline in place



– Internal controls minimise vulnerability to patent infringement

and invalidity actions

Novo Nordisk Annual Report 2020 / 35Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

76.5% of votes

28.1% of capital

23.5% of votes

71.9% of capital

Novo Nordisk A/S

537 million A shares

(nominal value DKK 107 mDKK)

1,813 million B shares

(nominal value DKK 363 mDKK)

Novo Nordisk Foundation

Novo Holdings A/S

Institutional and private investors

Ownership structure

1. Novo Holdings A/S's registered address is Tuborg Havnevej 19, DK-2900 Hellerup, Denmark.

2. Using shareholder registered home countries.



Shares and

capital structure

Through open and proactive

communication, Novo Nordisk aims to

provide the basis for fair and ecient

pricing of our shares.

Share capital and ownership



is divided into A and B share capital. The A and B

shares are calculated in units of DKK 0.20, amount-

ing to 2.35 billion shares. The A share capital,

consisting of 537 million shares, has a nominal

value of DKK 107,487,200 and the B share capital,

consisting of 1,813 million shares, has a nominal

value of DKK 362,512,800. Each A share carries

200 votes and each B share carries 20 votes. Novo

Nordisk's B shares are listed on Nasdaq Copenha-



as American Depository Receipts (ADRs).



held by Novo Holdings A/S

, a Danish public



Novo Nordisk Foundation. The Foundation has



commercial and research activities conducted by



Novo Nordisk A/S is the largest), and to support



the Articles of Association of the Foundation, the A

shares cannot be divested. Special rights attached

to A shares include pre-emptive subscription rights

in the event of an increase in the A share capital

and pre-emptive purchase rights in the event of



liquidation proceedings. A shares take priority for





practice, A and B shares receive the same amount

of dividend per share.

As of 31 December 2020, Novo Holdings A/S also

held a B share capital of nominally DKK 24,347,800.









There is no complete record of all shareholders;

-

tion, as of 31 December 2020 it is estimated that







Geographical split of

shareholders

% of share capital

Denmark North America

UK Other

41%

26%

25%

-

ed as ADRs), excluding Novo Holdings A/S's holding



As of 31 December 2020, Novo Holdings A/S and

Novo Nordisk B shares equalled 159,277,660

shares and had a nominal value of DKK 31,855,532.

For details about the share capital, see note 4.1 to



Capital structure



Management consider that the current capital and

share structure of Novo Nordisk serve the interests





Novo Nordisk Annual Report 2020 / 36Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Share price performance 2020

Novo Nordisk share price and indexed peers

Novo Nordisk Pharmaceutical industry index









DKK



competitive shareholder return in the short term.

The capital structure has been adjusted as a con-



1.8 billion acquisition of Emisphere Technologies



Dividend policy



pharmaceutical industry benchmark to ensure a

competitive payout ratio for dividend payments,











of DKK 0.20, corresponding to a payout ratio of



peer group average of 53.5%.



equalling DKK 3.25 per A and B share of DKK





5.85 to be paid in March 2021, equivalent to a

total dividend for 2020 of DKK 9.10 and a payout

ratio of 50.0%. The company expects to distribute

an interim dividend in August 2021. Further







from distributable reserves. Novo Nordisk does not

pay a dividend on its holding of treasury shares.

Share repurchase programme for 2020/2021



February 2020, Novo Nordisk repurchased shares

-

gramme has primarily been conducted in accord-



Abuse Regulation (MAR). For the next 12 months,



share repurchase programme. The expected total

repurchase value of B shares amounts to a cash

value of up to DKK 17 billion. The total programme

-

velopment opportunities arise during 2021. Novo



share repurchase programme according to the

safe harbour rules in MAR. At the Annual General

Meeting in March 2021, the Board of Directors



B share capital, corresponding to approximate-

ly 1.7% of the total share capital, by cancelling

40,000,000 treasury shares.

Share price development





December 2020 close of DKK 426.65. For compar-



increased by 33.7% and the pharma peer group

decreased by 2.4% during 2020. The total market

-



705,374,617,388 as of 31 December 2020.

10.3%

33.7%

-2.4%

200

300

400

500

600

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Novo Nordisk Annual Report 2020 / 37Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Corporate governance

Shareholders

Key responsibilities The shareholders of Novo Nordisk have ultimate authority over the company and exercise their

right to make decisions at general meetings. At the Annual General Meeting, shareholders approve



elect Board members and the independent auditor. Resolutions can generally be passed by a simple

majority.



capital represented, unless other adoption requirements are imposed by the Danish Companies Act.



operational matters are decided solely by the Board of Directors and Executive Management.

Board of Directors

Key responsibilities



- Chairmanship

- Audit Committee

- Nomination

Committee

- Remuneration

Committee

- R&D Committee







– Develops the company as a focused, sustainable, global pharmaceutical company

– Supervises Executive Management

– Appoints members of Executive Management and determines their remuneration



performance of the company

– Ensures adequate management and organisation



Association



Annual General Meeting in 2020 and recorded in the meeting minutes available at novonordisk.com

Composition and independence





General Meeting after they reach the age of 70.





members are not independent, as they are related to the main shareholder, Novo Holdings A/S, and





are independent. For independence

, see table on page 44.

Danish-based employees may elect a number of Board members equalling half of the shareholder-



election in 2022, and have the same rights, duties and responsibilities as shareholder-elected members.

Executive Management

Key responsibilities Executive Management is responsible for overall day-to-day management, the organisation of the

company, allocation of resources, determination and implementation of strategies and policies,

direction setting, and ensuring timely reporting and provision of information to the Board of Directors



To ensure the organisational implementation of our strategy, Executive Management has established



Vice Presidents.

Composition and meetings

As of 31 December 2020, Executive Management consisted of nine members including the Chief













Novo Nordisk Annual Report 2020 / 38Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Board committees

Chairmanship Audit Committee Nomination Committee Remuneration Committee

Research &

Development Committee

Key responsibilities

Assists the Board of



– Planning of Board meetings

– Employment, incentive

remuneration and performance

evaluation of Executive

Management

– Represents the Board externally

– The external auditors

– The internal audit function

– Handling complaints reported

through the Compliance Hotline

– Financial, social and environmental

reporting (ESG reporting)

 

ESG reporting

– Business ethics compliance

– IT security and insurance coverage

 

composition of the Board

– Nomination of Board members

and Board committee members

– Annual evaluation of the Board

– Corporate governance of the

company

– The Remuneration Policy

– The actual remuneration of Board

members, Board committees and

Executive Management

– The research and development

strategy

– The pipeline

– The R&D organisation

Members

(appointed by

the Board)

For independence

and competencies

see table on page 44.

Consists of the chair and the vice



directly by the shareholders at the

general meetings.

At the Annual General Meeting in





elected as vice chair of the Board.

 

– Laurence Debroux

– Andreas Fibig

– Sylvie Grégoire

– Stig Strøbæk

– Helge Lund (chair)

– Sylvie Grégoire

– Kasim Kutay

– Mette Bøjer Jensen

– Jeppe Christiansen (chair)

– Brian Daniels

 

– Anne Marie Kverneland

– Martin Mackay (chair)

– Brian Daniels

– Sylvie Grégoire

– Kasim Kutay

– Thomas Rantzau

2020 key

activities

In 2020, the Chairmanship focussed

particularly on strategy execution





partnering and acquisitions to

access external innovation, talent



as succession preparedness, core

capabilities and development of the

company culture and impact of the

COVID-19 pandemic.

In 2020, the Audit Committee focused



and external auditors and held

focus sessions on risks and internal

controls. The Audit Committee also

discussed key accounting matters,

including provisions for sales rebates,

indirect production costs, ongoing

tax and legal cases and impairment.



Information Security, Business Ethics

Compliance and Compliance Hotline

cases. Finally, the Audit Committee

recommended Deloitte to be elected

as external auditor in 2021.

In 2020, the Nomination Committee



composition of the Board, identifying



considering long-term succession



competences to be represented on

the Board.

In 2020, the Remuneration

Committee focused particularly

on executive remuneration in light

of the COVID-19 pandemic, on

assessing the design and structure



term incentive programme for the

Executive Management in 2021 and

on enhancing the transparency in

remuneration reporting even further.

In 2020, the Research & Development

Committee focused particularly on



and discussed potential additional

research and development activities

to further explore opportunities





addition, the committee discussed the

potential opportunities for addressing

unmet needs in mild cognitive

impairment and mild dementia. It also









Novo Nordisk Annual Report 2020 / 39Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Gender – Board members

Men Women

Shareholder-/employee-elected

Board members

Shareholder-elected

Employee-elected

38%

31%

62%

69%

Nationality – Board members

Non-Nordic Nordic

54%

46%

Nomination

The Nomination Committee presents proposals

for election or re-election of shareholder-elected

Board members to the Board of Directors. When

recommending candidates to be nominated by

the Board, the Nomination Committee considers



and continuity, the desired competences and

experience, the performance of the individual



as independence considerations.

The Board of Directors has determined a



Board members. Board members should possess



literacy, commitment and desire for innovation.





business management, strategic operations and

governance. Healthcare industry and market

access. Research and development, technology

and digitalisation. M&A and external innovation

sourcing. People leadership and change

management. Finance and accounting.

-







Board diversity





diversity among shareholder-elected Board







have at least three shareholder-elected Board

members of each gender.





members and seven non-Nordic members. Of









and nationality is of continued importance, and



prolonged its gender and nationality ambition











Danish Financial Statements Act, Novo Nordisk

discloses current performance on diversity in



diversity policy is available in that section.

Evaluation

The Board conducts an annual evaluation. The

evaluation includes all Board members and

executives. The chair has overall responsibility



Nomination Committee. Every third year, the

evaluation is facilitated by external consultants,





facilitated by the secretary of the Nomination



The evaluation includes topics such as Board



succession, performance of the Chairmanship





Board and Executive Management. Each Board

member and executive also receives feedback

from all other Board members and executives on

their individual performance.







evaluation revealed good performance by the



and Executive Management. The evaluation

resulted in continued focus on Board culture,



Board documentation and presentations, Board







Governance practices

Novo Nordisk Annual Report 2020 / 40Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Remuneration



by the Annual General Meeting describing Board

and Executive remuneration. The policy replaces



-







the Remuneration Principles applied to Board

remuneration relating to the period up to and





Remuneration Policy and the Remuneration





corporate-governance/remuneration.html

Novo Nordisk has prepared a separate

Remuneration Report describing the remuner-





Danish Business Authority. The Remuneration



Meeting for an advisory vote. The Remuneration





corporate-governance/remuneration.html

Danish Corporate

Governance Recommendations

not being fullled

3.3.2

Disclosure of additional information



on matters such as numbers of shares



disclosed in the Remuneration Report

for 2020 and not in the management

commentary.

3.4.2



The majority of the members of the

Nomination Committee and the

Remuneration Committee are not

independent.

3.4.6



Responsibility for succession manage-

ment and recommending candidates

for the Executive Management resides



Nomination Committee.

3.4.7



Responsibility for the remuneration pol-

icy applicable to employees in general





4.1.5



employment contract entered into







contribution, and thus the total value of

the remuneration relating to the notice

period and of the severance payment



Compliance with corporate governance codes





Exchange (NYSE) as American Dipository Receipts

(ADRs).

Today, Novo Nordisk adheres to all Danish



designated by Nasdaq Copenhagen except



the heading 'Danish Corporate Governance





Corporate Governance Standards of the NYSE

applicable to foreign private issuers. A summary





NYSE Corporate Governance Standards can be







about the applicable corporate governance codes



York Stock Exchange is available at



corporate-governance/recommendations-and

-practices.html

the Danish Financial Statements Act.

Disclosure regarding change of control

The EU Takeover Bids Directive, as partially imple-

mented by the Danish Financial Statements Act,

requires listed companies to disclose information

that may be of interest to the market and poten-

tial take-over bidders, in particular in relation

to disclosure of change-of-control provisions in

material contracts.

Novo Nordisk discloses that the Group has one







could – at the discretion of the relevant counter-

party – lead to the termination of such agree-



Nordisk, the risk is considered to be remote.

In relation to Executive Management,





base salary plus pension contributions in the

event of a merger, acquisition or takeover of Novo

Nordisk.



Novo Nordisk, see 'Shares and capital structure'.

Novo Nordisk Annual Report 2020 / 41Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Board of Directors

Helge Lund — Chair

Chair of the Board of Novo Nordisk

A/S since 2018 (member for one

year in 2014-2015 and again in

2017) and chair of the Nomination

Committee since 2018 (member

since 2017).

Positions and management duties:

Operating advisor to Clayton

Dubilier & Rice, US. Chair of the

boards of BP p.l.c. UK and Inkerman



boards of P/F Tjaldur, Faroe Islands

and Belron SA, Luxembourg.

Member of the board of Trustees of

the International Crisis Group.

Special competences:

Extensive executive and board

experience in large multinational





Education:

MBA from INSEAD, France (1991)

and MA in Economics from the



& Business Administration (NHH),



Jeppe Christiansen — Vice Chair

Vice chair and member of the

Board of Novo Nordisk A/S since

2013. Chair of the Remuneration

Committee since 2017 (member

since 2015).

Positions and management duties:



-





company, both in Denmark. Chair of

Haldor Topsøe A/S, Emlika Holding

-

iaries of the latter company, and

chair of JEKC Holding ApS. Board

member of Novo Holdings A/S and

KIRKBI A/S, Pluto Naturfonden and

Randers Regnskov, all in Denmark.

Member of the board of BellaBeat

Inc., US. Member of the board of

Governors of Det Kgl. Vajsenhus,

Denmark. Adjunct Professor, De-

partment of Finance, Copenhagen

Business School, Denmark.

Special competences:

Executive background and









the investor perspective.

Education:

MSc in Economics from University

of Copenhagen, Denmark (1985).

Brian Daniels

Member of the Board of Novo

Nordisk A/S since 2016, member of

the Remuneration Committee since

2018 and member of the Research

& Development Committee since

2017.

Positions and management duties:



Management, LLC, member of the

board at Caballeta Bio Inc., and

Artiva Biotherapeutics, all in the US.

Special competences:

Extensive experience in clinical



corporate strategy across a broad



the pharmaceutical industry,

especially in the US.

Education:

MD from Washington University,

St. Louis, US (1987), and MA

in Metabolism and Nutritional

Biochemistry (1981) and BSc

in Life Sciences (1981), both

from Massachusetts Institute of

Technology, Cambridge, US.

Laurence Debroux

Member of the Board of Novo

Nordisk A/S and member of the

Audit Committee since 2019.

Positions and management duties:



executive board member of

Heineken N.V., the Netherlands.

Member of the board of Exor N.V.,

the Netherlands, and of HEC Paris

Business School, France.

Special competences:



accounting experience, extensive



pharmaceutical industry and

experience from executive positions

in major international companies.

Education:

Master's Degree from HEC

Paris, Ecoles des Hautes Etudes

Commerciales, France (1992).

Andreas Fibig

Member of the Board of Novo

Nordisk A/S and member of the

Audit Committee since 2018.

Positions and management duties:



International Flavors & Fragrances

Inc., US, Chair of the board of

the German American Chamber

of Commerce, and Executive

Committee member of the World

Business Council for Sustainable

Development (WBCSD).

Special competences:



biopharmaceutical companies,







companies operate.

Education:

Degree in Marketing from Berlin

School of Economics, Germany

(1982).

Sylvie Grégoire

Member of the Board of Novo

Nordisk A/S and of the Audit

Committee since 2015, member

of the Research & Development

Committee since 2017, and

member of the Nomination

Committee since 2018.

Positions and management duties:

Executive Chair of the board of EIP

Pharma, Inc., and member of the

board of Perkin Elmer Inc., both in

the US.

Special competences:



environment in both the US and the



of the product life cycle, including

discovery, registration, pre-launch



on the market. Ms. Grégoire also



P&L responsibility.

Education:

Pharmacy Doctorate degree from



US (1986), BA in Pharmacy from

Laval University, Canada (1984),

and Science College degree from

Séminaire de Sherbrooke, Canada

(1980).

Novo Nordisk Annual Report 2020 / 42Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Liz Hewitt

Member of the Board of

Novo Nordisk A/S since 2012,

chair of the Audit Committee

since 2015 (member since

2012) and member of the

Remuneration Committee

since 2018.

Positions and

management duties:

Member (senior independent

director) of the board of

Melrose Industries plc, UK,



committee, and member of

the board of National Grid

plc, UK.

Special competences:

Extensive experience







mergers and acquisitions,



large international companies

operate.

Education:



Accountant FCA (UK Institute

of Chartered Accountants)

(1982), and BSc (Econ Hons)

from the University College in

London, UK (1977).

Mette Bøjer Jensen

Member of the Board of

Novo Nordisk A/S (employee

representative) and member

of the Nomination Committee

since 2018.

Positions and

management duties:

Wash & Sterilisation Specialist

in Product Supply, Novo

Nordisk A/S.

Education:

Graduate Programme (HD)

in Business Administration

(Strategic management and

business development) from

Copenhagen Business School,

Denmark (2010), and MSc

in Biotechnology, Aalborg

University, Denmark (2001).

Kasim Kutay

Member of the Board of Novo

Nordisk A/S and member of

the Nomination Committee

since 2017 and member of

the Research & Development

Committee since 2020.

Positions and

management duties:



Novo Holdings A/S, Denmark.

Member of the board of

Novozymes A/S, Denmark,

of Evotec SE, Germany, and

of the Life Sciences Advisory

board of Gimv NV, Belgium.

Special competences:

Extensive experience as an

investor in the life science

sector. Mr Kutay manages an

investment fund that invests

in life science companies at

all stages of development

including the venture,



stages. Extensive experience



pharmaceutical, biotechnology

and medical device industries.

Mr Kutay has also advised

healthcare companies on an

international basis including

companies based in Europe,

the US, Japan and India.

Education:

MSc in Economics (1987), and

BSc in Economics (1986), both

from the London School of

Economics, UK.

Anne Marie Kverneland

Member of the Board of

Novo Nordisk A/S since 2000

(employee representative) and

member of the Remuneration

Committee since 2017.

Positions and

management duties:

Laboratory technician and

full-time union representative

in Novo Nordisk A/S. Member

of the Board of Directors of

the Novo Nordisk Foundation

since 2014.

Education:

Degree in medical laboratory

technology (laboratory

technologist) from

Copenhagen University

Hospital, Denmark (1980).

Martin Mackay

Member of the Board of Novo

Nordisk A/S and chair of the

Research & Development

Committee since 2018.

Positions and

management duties:

Co-founded Rallybio LLC, US,

in January 2018 and serves

as chair of the board and

CEO of the company and

in an executive leadership

role overseeing all research

and non-research functions.



Acquisition Corporation,



Leaf Venture Partners, LLC,

US. Member of the board

and chairs the Science and

Technology Committee of

Charles River Laboratories

International, Inc., US.

Special competences:



experience in building a

pipeline, acquiring products

and managing the portfolio

of early-stage and late-stage

projects in large international

pharmaceutical companies.

Education:

Doctorate/PhD from University

of Edinburgh, UK (1984), and

BSc (First Class Honours) in

Microbiology from Heriot-Watt

University, Edinburgh, UK

(1979).

Thomas Rantzau

Member of the Board of

Novo Nordisk A/S (employee

representative) and

member of the Research &

Development Committee since

2018.

Positions and

management duties:

Area specialist in Product

Supply, Novo Nordisk A/S.

Education:

Degree in food engineering

from DTU, Denmark (2003)

and diploma as dairy

technician (1992).

Stig Strøbæk

Member of the Board of

Novo Nordisk A/S since 1998

(employee representative)

and member of the Audit

Committee since 2013.

Positions and

management duties:

Electrician and a full-time

union representative in Novo

Nordisk A/S.

Education:

Diploma in further training

for board members from the



Pension Fund (LD) (2003),

and diploma in electrical

engineering (1984).

Novo Nordisk Annual Report 2020 / 43Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Meeting attendance in 2020

Name (male/female)

First

elected Term Nationality Born Independence

Board of

Directors

Chairmanship Audit

Committee

Nomination

Committee

Remuneration

Committee

R&D

Committee Competencies

Helge Lund (m) 2017

2021  Oct. 1962 Independent

Jeppe Christiansen (m) 2013 2021 Danish Nov. 1959 Not independent

Laurence Debroux (f) 2019 2021 French Jul. 1969 Independent

Brian Daniels (m) 2016 2021 American Feb. 1959 Independent

Andreas Fibig (m) 2018 2021 German Feb. 1962 Independent

5, 6

Sylvie Grégoire (f) 2015 2021 Canadian/American Nov. 1961 Independent

5, 6

 2012 2021 British Nov. 1956 Independent

5, 6, 9

Mette Bøjer Jensen (f) 2018 2022 Danish Dec. 1975 Not independent

N/A (employee-elected)

Kasim Kutay (m) 2017 2021 British May 1965 Not independent

Anne Marie Kverneland (f) 2000 2022 Danish Jul. 1956 Not independent

N/A (employee-elected)

Martin Mackay (m) 2018 2021 American Apr. 1956 Independent

Thomas Rantzau (m) 2018 2022 Danish Mar. 1972 Not independent

N/A (employee-elected)

Stig Strøbæk (m) 1998 2022 Danish Jan. 1964 Not independent

5, 7

N/A (employee-elected)









Independence, meeting attendance and competence overview

Competencies and experiences to be represented among shareholder-elected Board members (see page 40)

Global business management, strategic operations and governance Healthcare industry and market access

Research and development, technology and digitalisation M&A and external innovation sourcing

People leadership and change management Finance and accounting

Novo Nordisk Annual Report 2020 / 44Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Executive Management

Lars Fruergaard Jørgensen

— President and Chief

Executive Ocer (CEO)



Other positions and

management duties:

Vice chair of the supervisory

board and member of the audit

committee and nomination

committee of Carlsberg A/S,

Denmark.

As of 1 January 2021, vice president

elect of the European Federation

of Pharmaceutical Industries and

Associations (EFPIA).

Monique Carter

— Executive Vice President,

People & Organisation



Other positions and

management duties:

No other management positions.

Camilla Sylvest

— Executive Vice President,

Commercial Strategy &

Corporate Aairs



Other positions and

management duties:

Member of the board of Danish



Vice Chair of the board of the World

Diabetes Foundation, Denmark.

Mads Krogsgaard Thomsen

— Executive Vice President,

Chief Science Ocer (CSO)



Other positions and

management duties:

Member of the board of BB Biotech



editorial boards of international,



Adjunct professor at the Faculty

of Health and Medical Sciences

of the University of Copenhagen,

Denmark.

Henrik Wul

— Executive Vice President,

Product Supply, Quality & IT



Other positions and

management duties:

Member of the board of Ambu A/S,

Denmark and member of the board

of Grundfos Holding A/S, Denmark.

Maziar Mike Doustdar

— Executive Vice President,

International Operations



Other positions and

management duties:

No other management positions.

Ludovic Helfgott

— Executive Vice President,

Biopharm



Other positions and

management duties:

President of the Novo Nordisk

Haemophilia Foundation Council.

Karsten Munk Knudsen

— Executive Vice President,

Chief Financial Ocer (CFO)



Other positions and

management duties:

Chair of the board of NNE A/S,

Denmark.

Doug Langa

— Executive Vice President,

North America Operations



Other positions and

management duties:

No other management positions.



Danish Business Authority.

Novo Nordisk Annual Report 2020 / 45Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 46

Manuel

Consolidated nancial, environmental, social and

governance statements 2020

Consolidated nancial statements

Income statement p. 47

Cash ow statement p. 48

Balance sheet p. 49

Equity statement p. 50

Notes to the consolidated nancial statements

Section 1

Basis of preparation

1.1 Principal accounting policies and key accounting estimates p. 51

1.2 Changes in accounting policies and disclosures p. 51

Section 2

Results for the year

2.1 Net sales and rebates p. 52

2.2 Segment information p. 53

2.3 Research and development costs p. 55

2.4 Employee costs p. 55

2.5 Other operating income, net p. 56

2.6 Income taxes and deferred income taxes p. 56

Section 3

Operating assets and liabilities

3.1 Intangible assets and property, plant and equipment p. 58

3.2 Leases p. 60

3.3 Inventories p. 61

3.4 Trade receivables p. 61

3.5 Retirement benet obligations p. 62

3.6 Provisions and contingent liabilities p. 63

3.7 Other liabilities p. 64

Section 4

Capital structure and nancial items

4.1 Earnings per share, distributions to shareholders, treasury

shares, share capital and other reserves p. 65

4.2 Financial risks p. 66

4.3 Derivative nancial instruments p. 68

4.4 Borrowings p. 69

4.5 Cash and cash equivalents, nancial reserves and free cash ow p. 69

4.6 Change in working capital p. 70

4.7 Other non-cash items p. 70

4.8 Financial assets and liabilities p. 71

4.9 Financial income and expenses p. 72

Section 5

Other disclosures

5.1 Share-based payment schemes p. 73

5.2 Commitments p. 75

5.3 Related party transactions p. 76

5.4 Fee to statutory auditors p. 76

5.5 General accounting policies p. 76

5.6 Companies in the Novo Nordisk Group p. 77

Statement of environmental, social and governance (ESG)

performance (supplementary information)

Statement of ESG performance p. 81

Notes to the ESG statement

Section 6

Basis of preparation p. 82

Section 7

Environmental performance

7.1 Energy consumption for operations and share of

renewable power p. 83

7.2 Water consumption for production sites p. 83

7.3 CO

emissions from operations and transportation p. 83

7.4 Waste from production sites p. 84

Section 8

Social performance

8.1 Patients reached with Novo Nordisk’s Diabetes care products p. 84

8.2 Donations and other contributions p. 84

8.3 Employees p. 85

8.4 Frequency of occupational accidents p. 85

8.5 Animals purchased for research p. 85

8.6 Gender diversity p. 85

Section 9

Governance performance

9.1 Business ethics p. 86

9.2 Facilitations of the Novo Nordisk Way p. 86

9.3 Supplier audits p. 86

9.4 Product recalls p. 86

9.5 Failed inspections p. 86

9.6 Company trust p. 86

9.7 Total tax contribution p. 87

9.8 Breaches of environmental regulatory limit values p. 87

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 47

Income statement

and statement of comprehensive income for the year ended 31 December

DKK million Note 2020 2019 2018

Income statement

Net sales 2.1, 2.2 126,946 122,021 111,831

Cost of goods sold 2.2 20,932 20,088 17,617

Gross prot 106,014 101,933 94,214

Sales and distribution costs 2.2 32,928 31,823 29,397

Research and development costs 2.2, 2.3 15,462 14,220 14,805

Administrative costs 2.2 3,958 4,007 3,916

Other operating income, net 2.2, 2.5 460 600 1,152

Operating prot 54,126 52,483 47,248

Financial income 4.9 1,628 65 2,122

Financial expenses 4.9 2,624 3,995 1,755

Prot before income taxes 53,130 48,553 47,615

Income taxes 2.6 10,992 9,602 8,987

Net prot 42,138 38,951 38,628

Earnings per share

Basic earnings per share (DKK) 4.1 18.05 16.41 15.96

Diluted earnings per share (DKK) 4.1 18.01 16.38 15.93

DKK million Note 2020 2019 2018

Statement of comprehensive income

Net prot 42,138 38,951 38,628

Other comprehensive income:

Items that will not be reclassied subsequently to the income statement:

Remeasurements of retirement benet obligations 3.5 (67) (187) 87

Items that will be reclassied subsequently to the income statement:

Exchange rate adjustments of investments in subsidiaries (1,689) 226 491

Cash ow hedges:

Realisation of previously deferred (gains)/losses 4.1, 4.3 329 1,677 (2,027)

Deferred gains/(losses) incurred during the period 4.1, 4.3 1,384 (329) (1,677)

Other items 10 9 (27)

Tax on other comprehensive income, income/(expense) 2.6 (577) (231) 755

Other comprehensive income, net of tax (610) 1,165 (2,398)

Total comprehensive income 41,528 40,116 36,230

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 48

Cash ow statement

for the year ended 31 December

DKK million Note 2020 2019 2018

Purchase of treasury shares 4.1 (16,855) (15,334) (15,567)

Dividends paid 4.1 (20,121) (19,409) (19,048)

Repayment of borrowings 4.4 (950) (822) —

Proceeds from borrowings 4.4 5,682 81 94

Net cash used in nancing activities (32,244) (35,484) (34,521)

Net cash generated from activities (2,729) (211) (1,985)

Cash and cash equivalents at the beginning of the year 4.5 15,411 15,629 17,158

Reclassication of bank overdraft to nancing activities — — 412

Exchange gains/(losses) on cash and cash equivalents (456) (7) 44

Cash and cash equivalents at the end of the year 4.5 12,226 15,411 15,629

DKK million Note 2020 2019 2018

Cash ow statement

Net prot 42,138 38,951 38,628

Adjustment of non-cash items:

Income taxes in the income statement 2.6 10,992 9,602 8,987

Depreciation, amortisation and impairment losses 3.1 5,753 5,661 3,925

Other non-cash items 4.7 7,849 7,032 6,098

Change in working capital 4.6 (4,353) (3,388) (3,370)

Interest received 100 64 51

Interest paid (422) (204) (89)

Income taxes paid 2.6 (10,106) (10,936) (9,614)

Net cash generated from operating activities 51,951 46,782 44,616

Purchase of intangible assets 3.1 (16,256) (2,299) (2,774)

Proceeds from sale of property, plant and equipment 7 4 13

Purchase of property, plant and equipment 3.1 (5,825) (8,932) (9,636)

Proceeds from other nancial assets 12 148 178

Purchase of other nancial assets — (350) (248)

Investment in associated companies 5.3 (392) (97) —

Proceeds from the divestment of Group and

associated companies — (3) 368

Dividend received from associated companies 5.3 18 20 19

Net cash used in investing activities (22,436) (11,509) (12,080)

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 49

Balance sheet

at 31 December

DKK million Note 2020 2019

Equity and liabilities

Share capital 4.1 470 480

Treasury shares 4.1 (8) (10)

Retained earnings 63,774 57,817

Other reserves 4.1 (911) (694)

Total equity 63,325 57,593

Borrowings 4.4 2,897 3,009

Deferred income tax liabilities 2.6 2,502 80

Retirement benet obligations 3.5 1,399 1,334

Provisions 3.6 4,526 4,613

Total non-current liabilities 11,324 9,036

Borrowings 4.4 7,459 1,474

Trade payables 5,717 6,358

Tax payables 3,913 4,212

Other liabilities 3.7 17,005 15,085

Derivative nancial instruments 4.3 1,365 734

Provisions 3.6 34,814 31,120

Total current liabilities 70,273 58,983

Total liabilities 81,597 68,019

Total equity and liabilities 144,922 125,612

DKK million Note 2020 2019

Assets

Intangible assets 3.1 20,657 5,835

Property, plant and equipment 3.1 50,269 50,551

Investments in associated companies 582 474

Deferred income tax assets 2.6 5,865 4,121

Other receivables and prepayments 674 841

Other nancial assets 1,066 1,334

Total non-current assets 79,113 63,156

Inventories 3.3 18,536 17,641

Trade receivables 3.4 27,734 24,912

Tax receivables 289 806

Other receivables and prepayments 4,161 3,434

Derivative nancial instruments 4.2, 4.3 2,332 188

Cash at bank 4.2, 4.5 12,757 15,475

Total current assets 65,809 62,456

Total assets 144,922 125,612

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 50

Slet tom linje,

dog ikke i w-desk

Equity statement

at 31 December

2020 2019 2018

DKK million

capital

Treasury

Retained

earnings

Other

reserves Total

capital

Treasury

Retained

earnings

Other

reserves Total

capital

Treasury

Retained

earnings

Other

reserves Total

Balance at the beginning of the year 480 (10) 57,817 (694) 57,593 490 (11) 53,406 (2,046) 51,839 500 (11) 48,887 439 49,815

Net prot 42,138 42,138 38,951 38,951 38,628 38,628

Other comprehensive income (67) (543) (610) (187) 1,352 1,165 87 (2,485) (2,398)

Total comprehensive income 42,071 (543) 41,528 38,764 1,352 40,116 38,715 (2,485) 36,230

Transfer of cash ow hedge reserve to

intangible assets 326 326

Transactions with owners:

Dividends (note 4.1) (20,121) (20,121) (19,409) (19,409) (19,048) (19,048)

Share-based payments (note 5.1) 823 823 363 363 414 414

Tax related to restricted stock units 31 31 18 18 (5) (5)

Purchase of treasury shares (note 4.1) (8) (16,847) (16,855) (9) (15,325) (15,334) (10) (15,557) (15,567)

Reduction of the B share capital (note 4.1) (10) 10 — (10) 10 — (10) 10 —

Balance at the end of the year 470 (8) 63,774 (911) 63,325 480 (10) 57,817 (694) 57,593 490 (11) 53,406 (2,046) 51,839

Refer to note 4.1 for details of movements in other reserves.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 51

Rigth indent i den

bredde kolonne

8px

Section 1

Basis of preparation

1.1 Principal accounting policies and key

accounting estimates

Principal accounting policies Key accounting estimates and judgements Note Estimation risk

US net sales and rebates Estimate of US sales deductions and provisions for sales rebates 2.1 High

Income taxes and deferred income taxes Judgement and estimate regarding deferred income tax assets and

provision for uncertain tax positions

2.6 Medium

Intangible assets Estimate regarding impairment of assets and judgement of whether a

transaction is an asset acquisition or a business combination

3.1 Low

Inventories Estimate of indirect production costs capitalised and inventory write-down 3.3 Low

Provisions and contingent liabilities Estimate of ongoing legal disputes, litigation and investigations 3.6 Medium

Key accounting estimates and judgements

The use of reasonable estimates and judgements is an essential part

of the preparation of the consolidated nancial statements. Given the

uncertainties inherent in Novo Nordisk’s business activities, Management

must make certain estimates regarding valuation and make judgements on

the reported amounts of assets, liabilities, net sales, expenses and related

disclosures.

The key accounting estimates identied are those that have a signicant

risk of resulting in a material adjustment to the measurement of

assets and liabilities in the following reporting period. An example

being the estimation of US sales deductions and provisions for sales

rebates. Management bases its estimates on historical experience and

various other assumptions that are held to be reasonable under the

circumstances. The estimates and underlying assumptions are reviewed

on an ongoing basis. If necessary, changes are recognised in the period in

which the estimate is revised. Management considers the key accounting

estimates to be reasonable and appropriate based on currently available

information. The actual amounts may dier from the amounts estimated as

more detailed information becomes available.

In addition, Management makes judgements in the process of applying the

entity’s accounting policies, for example the classication of a transaction

as an asset acquisition or a business combination.

Management regards those listed below as the key accounting estimates

and judgements used in the preparation of the consolidated nancial

statements.

Please refer to the specic notes for further information on the key

accounting estimates and judgements as well as assumptions applied.

Applying materiality

The consolidated nancial statements are a result of processing large

numbers of transactions and aggregating those transactions into classes

according to their nature or function. The transactions are presented in

classes of similar items in the consolidated nancial statements. If a line

item is not individually material, it is aggregated with other items of a similar

nature in the consolidated nancial statements or in the notes.

Management provides specic disclosures required by IFRS unless the

information is not applicable or is considered immaterial to the decision-

making of the primary users of these nancial statements.

1.2 Changes in accounting policies and disclosures

Adoption of new or amended IFRSs

Management has assessed the impact of new or amended and revised

accounting standards and interpretations (IFRSs) issued by the IASB and

IFRSs endorsed by the European Union eective on or after 1 January 2020.

The Group adopted the amendments to IFRS 3 for the rst time in 2020.

The amendments narrow and clarify the denition of a business and

permit a simplied assessment of whether an acquired set of activities and

assets is a group of assets rather than a business (concentration test). The

amendments are applied prospectively to all business combinations and

asset acquisitions with an acquisition date on or after 1 January 2020.

It is assessed that application of other new amendments eective from

1 January 2020 has not had a material impact on the consolidated nancial

statements in 2020. Furthermore, Management does not anticipate any

signicant impact on future periods from the adoption of these new

amendments.

Adoption of new or amended IFRSs in prior periods

As of 1 January 2019, Novo Nordisk applied IFRS 16 'Leases' for the rst

time. The standard was implemented using the modied retrospective

approach. On transition to IFRS 16 the Group recognised an additional DKK

3,778 million of right-of-use assets and DKK 3,988 million of lease liabilities.

The implementation did not have any impact on equity.

As of 1 January 2018, Novo Nordisk applied IFRS 9 'Financial Instruments'

and IFRS 15 'Revenue from contracts with customers' for the rst time.

The impact of the implementation of IFRS 9 and IFRS 15 was immaterial in

relation to recognition and measurement.

The consolidated nancial statements included in this Annual Report

have been prepared in accordance with International Financial Reporting

Standards (IFRS) as issued by the International Accounting Standards

Board (IASB) and in accordance with IFRS as endorsed by the EU and

further requirements in the Danish Financial Statements Act. All entities in

the Novo Nordisk Group follow the same Group accounting policies.

Measurement basis

The consolidated nancial statements have been prepared on the historical

cost basis except for derivative nancial instruments, equity investments and

trade receivables in a factoring portfolio, which are measured at fair value.

Except for the changes described in note 1.2, the principal accounting

policies set out below have been applied consistently in the preparation

of the consolidated nancial statements for all the years presented. The

general accounting policies are described in note 5.5.

Principal accounting policies

Novo Nordisk’s accounting policies are described in each of the individual

notes to the consolidated nancial statements. Accounting policies listed

in the table below are regarded as the principal accounting policies applied

by Management.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 52

Manuel

Knib som tidligere

2.1 Net sales and rebates

Gross-to-net sales reconciliation

DKK million 2020 2019 2018

Gross sales 298,187 270,431 230,701

US Managed Care and Medicare (96,716) (84,202) (65,207)

US wholesaler charge-backs (37,036) (33,772) (29,469)

US Medicaid rebates (17,307) (14,365) (11,950)

Other US discounts and sales

returns (10,867) (8,280) (6,606)

Non-US rebates, discounts and

sales returns (9,315) (7,791) (5,638)

Total gross-to-net sales

adjustments (171,241) (148,410) (118,870)

Net sales 126,946 122,021 111,831

Provisions for sales rebates

DKK million 2020 2019 2018

At the beginning of the year 30,878 25,760 20,374

Additional provisions, including

increases to existing provisions 111,921 102,782 82,631

Amount paid during the year (106,116) (98,655) (78,647)

Adjustments, including unused

amounts reversed during the year 166 381 386

Eect of exchange rate adjustment (2,797) 610 1,016

At the end of the year 34,052 30,878 25,760

Sales discounts and sales rebates are predominantly issued in the US. As

such, rebates amount to 74% of gross sales in the US (71% in 2019 and 68%

in 2018). Provisions for sales rebates includes US Managed Care, Medicare,

Medicaid and other minor US rebate types, as well as rebates in a number of

European countries and Canada.

Pricing mechanisms in the US market

In the US, sales rebates are paid in connection with public healthcare

insurance programmes, namely Medicare and Medicaid, as well as rebates

to pharmacy benet managers (PBMs) and managed healthcare plans.

Key customers in the US include private payers, PBMs and government

payers. PBMs and managed healthcare plans play a role in negotiating

price concessions with drug manufacturers for both the commercial and

government channels, and determine which drugs are covered on their

formularies (or 'preferred drug lists').

US Managed Care and Medicare

For Managed Care and Medicare, rebates are oered to a number of

PBMs and managed healthcare plans. These rebate programmes allow the

customer to receive a rebate after attaining certain performance parameters

relating to formulary status or pre-established market shares thresholds.

Rebates are estimated according to the specic terms in each agreement,

historical experience, anticipated channel mix, growth rates and market

share information. Novo Nordisk adjusts the provision periodically to

reect actual sales performance. Managed Care and Medicare rebates are

generally settled around 100 days from the transaction date.

US wholesaler charge-backs

Wholesaler charge-backs relate to contractual arrangements between Novo

Nordisk and indirect customers in the US whereby products are sold at

contract prices lower than the list price originally charged to wholesalers. A

wholesaler charge-back represents the dierence between the invoice price

to the wholesaler and the indirect customer’s contract price. Accruals 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 30 days after receipt of claim.

US Medicaid rebates

Medicaid is a government insurance programme. Medicaid rebates have been

estimated using a combination of historical experience, product and population

growth, price changes, and the impact of contracting strategies. The calculation

also involves interpretation of relevant regulations that are subject to changes

in interpretative guidance from government authorities. Novo Nordisk adjusts

the provision periodically to reect actual sales performance. Medicaid rebates

are generally settled around 150 days from the transaction date.

Other US and non-US discounts and sales returns

Other discounts are provided to distributors, wholesalers, hospitals,

pharmacies, etc. They are usually linked to sales volume or provided as cash

discounts. Discounts are calculated based on historical data and recorded

as a reduction in gross sales at the time the related sales are recorded. Sales

returns relate to damaged or expired products.

Other net sales disclosures

In 2020, Novo Nordisk had three major wholesalers distributing products in

the US, representing 19%, 13% and 12% respectively of total net sales (19%,

14% and 12% in 2019 and 20%, 13% and 13% in 2018). Sales to these three

wholesalers are within both Diabetes and Obesity care and Biopharm.

Net sales to be recognised from fullling existing customer contracts

containing xed or minimum sales volumes, with an original term greater

than 12 months, are expected to be DKK 431 million within 12 months (DKK

544 million in 2019) and DKK 216 million thereafter (DKK 32 million in 2019).

Novo Nordisk's sales are impacted by exchange rate changes. Refer to note

4.2 for development in key exchange rates.

Accounting policies

Revenue from sale of goods is recognised when Novo Nordisk has

transferred control of products sold to the buyer and it is probable that

Novo Nordisk will collect the consideration to which it is entitled for

transferring the products. Control of the products is transferred at a point

in time, typically on delivery. The amount of sales to be recognised is based

on the consideration Novo Nordisk expects to receive in exchange for its

goods. When sales are recognised, Novo Nordisk also records estimates for

a variety of sales deductions, including product returns as well as rebates

and discounts to government agencies, wholesalers, health insurance

companies, managed healthcare organisations and retail customers. Sales

deductions are recognised as a reduction of gross sales to arrive at net

sales, by assessing the expected value of the sales deductions (variable

consideration). Where contracts contain customer acceptance criteria, Novo

Nordisk recognises sales when the acceptance criteria are satised.

In some markets, Novo Nordisk sells products on a sale-or-return basis.

Where there is historical experience or a reasonably accurate estimate of

future returns, estimated product returns are recorded as a reduction in

sales. Where shipments of new products are made on a sale-or-return basis,

without sucient historical experience for estimating sales returns, revenue

is recorded based on estimated demand and acceptance rates for well-

established products with similar market characteristics. If similar market

characteristics do not exist, revenue is recorded when there is evidence of

consumption or when the right of return has expired.

Unsettled rebates are recognised as provisions when the timing or amount

is uncertain (note 3.6).

Where absolute amounts are known, the rebates are recognised as other

liabilities. Wholesaler charge-backs are netted against trade receivable balances.

Section 2

Results for the year

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 53

2.2 Segment information

Business segments – Key gures

Diabetes and Obesity care Biopharm Total

DKK million 2020 2019 2018 2020 2019 2018 2020 2019 2018

Total net sales 108,020 102,840 93,904 18,926 19,181 17,927 126,946 122,021 111,831

Cost of goods sold 17,715 16,309 14,716 3,217 3,779 2,901 20,932 20,088 17,617

Sales and distribution costs 29,903 28,729 26,396 3,025 3,094 3,001 32,928 31,823 29,397

Research and development costs 13,535 12,128 12,222 1,927 2,092 2,583 15,462 14,220 14,805

Administrative costs 3,387 3,346 3,266 571 661 650 3,958 4,007 3,916

Other operating income, net 264 309 538 196 291 614 460 600 1,152

Operating prot 43,744 42,637 37,842 10,382 9,846 9,406 54,126 52,483 47,248

Operating margin 40.5% 41.5% 40.3% 54.9% 51.3% 52.5% 42.6% 43.0% 42.2%

Depreciation, amortisation and

impairment losses expensed 4,624 3,916 3,210 1,129 1,745 715 5,753 5,661 3,925

Novo Nordisk operates in two business segments based on therapies:

Diabetes and Obesity care and Biopharm, representing the entirety of the

Group's operations.

The segments include research, development, manufacturing and marketing

of products within the following areas:

– Diabetes and Obesity care: insulin, GLP-1 and related delivery systems, oral

antidiabetic products (OAD), obesity and other serious chronic diseases.

– Biopharm: haemophilia, growth disorders and hormone replacement therapy.

Segment performance is evaluated on the basis of operating prot, consistent

with the consolidated nancial statements. Financial income and expenses, and

income taxes are managed at Group level and are not allocated to business

segments. There are no sales or other transactions between the business

segments. Costs have been split between business segments according to a

specic allocation. In addition, a small number of corporate overhead costs are

allocated systematically between the segments. Other operating income has

been allocated to the two segments based on the same principle.

Accounting policies

Operating segments are reported in a manner consistent with the internal

reporting provided to Executive Management and the Board of Directors. We

consider Executive Management to be the operating decision-making body,

as all signicant decisions regarding business development and direction are

taken in this forum.

The impact of foreign currency hedging is recognised in the income

statement in nancial items. Please refer to notes 4.2, 4.3 and 4.9 for more

details on hedging.

Key accounting estimates of sales deductions and provisions for

sales rebates

Sales deductions are estimated and provided for at the time the related

sales are recorded. These estimates of unsettled rebate, discount and

product return obligations require use of signicant judgement, as not all

conditions are known at the time of sale, for example total sales volume to a

given customer.

The estimates are based on analyses of existing contractual obligations

and historical experience. Provisions are calculated on the basis of a

percentage of sales for each product as dened by the contracts with the

various customer groups. Provisions for sales rebates are adjusted to actual

amounts as rebates, discounts and returns are processed.

Novo Nordisk considers the provisions established for sales rebates to be

reasonable and appropriate based on currently available information. However,

the actual amount of rebates and discounts may dier from the amounts

estimated by Management as more detailed information becomes available.

Geographical areas

Sales to external customers attributed to the US are collectively the most

material to the Group. The US and Mainland China are the only territories

where sales contribute 10% or more of total net sales.

In 2020 Novo Nordisk operated in two main commercial units:

– International Operations

– EMEA: Europe, the Middle East and Africa.

– China: Mainland China, Hong Kong and Taiwan.

– Rest of World: All other countries except for North America.

– North America Operations (the US and Canada)

International Operations was reorganised with eect from 1 April 2020,

and the geographical reporting has been amended to reect the new

organisation. Amounts for 2018 and 2019 have been restated. Refer to

note 5.6 for an overview of companies in the Novo Nordisk Group based on

geographical areas.

The country of domicile is Denmark, which is part of EMEA. Denmark is

immaterial to Novo Nordisk’s activities in terms of sales as 99.7% of total

sales are realised outside Denmark. Sales are attributed to geographical

areas according to the location of the customer.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 54

Net sales – Business segments and geographical areas

Total International Operations Total North America Operations

Total Novo Nordisk

net sales

Total IO EMEA China Rest of World Total NAO Of which the US

DKK million 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018

Diabetes and Obesity care segment:

Long-acting insulin 9,959 9,035 7,942 6,451 5,955 5,289 1,471 1,059 814 2,037 2,021 1,839 8,480 11,741 12,902 7,962 11,271 12,600 18,439 20,776 20,844

– of which Tresiba

4,407 3,477 2,764 2,574 1,983 1,479 418 87 16 1,415 1,407 1,269 4,561 5,782 5,271 4,191 5,500 5,192 8,968 9,259 8,035

– of which Xultophy

1,789 1,493 1,085 1,605 1,407 1,060 1 — — 183 86 25 655 717 529 642 708 528 2,444 2,210 1,614

– of which Levemir

3,763 4,065 4,093 2,272 2,565 2,750 1,052 972 798 439 528 545 3,264 5,242 7,102 3,129 5,063 6,880 7,027 9,307 11,195

Premix insulin 10,246 9,707 8,862 2,959 3,160 3,034 4,852 4,306 3,783 2,435 2,241 2,045 679 871 1,332 652 839 1,294 10,925 10,578 10,194

– of which Ryzodeg

1,291 993 714 321 237 152 39 4 — 931 752 562 — — — — — — 1,291 993 714

– of which NovoMix

/NovoLog Mix

8,955 8,714 8,148 2,638 2,923 2,882 4,813 4,302 3,783 1,504 1,489 1,483 679 871 1,332 652 839 1,294 9,634 9,585 9,480

Fast-acting insulin 10,808 10,304 9,332 6,584 6,422 5,931 2,075 1,753 1,450 2,149 2,129 1,951 7,505 8,999 10,021 7,101 8,592 9,634 18,313 19,303 19,353

– of which Fiasp

832 617 357 764 585 357 — — — 68 32 — 553 626 233 519 597 211 1,385 1,243 590

– of which NovoRapid

/NovoLog

9,976 9,687 8,975 5,820 5,837 5,574 2,075 1,753 1,450 2,081 2,097 1,951 6,952 8,373 9,788 6,582 7,995 9,423 16,928 18,060 18,763

Human insulin 7,339 7,361 7,348 2,370 2,438 2,592 2,655 2,847 2,821 2,314 2,076 1,935 1,534 1,675 1,917 1,431 1,552 1,778 8,873 9,036 9,265

Total insulin 38,352 36,407 33,484 18,364 17,975 16,846 11,053 9,965 8,868 8,935 8,467 7,770 18,198 23,286 26,172 17,146 22,254 25,306 56,550 59,693 59,656

Victoza

7,095 7,249 6,240 4,251 4,713 4,337 1,033 898 521 1,811 1,638 1,382 11,652 14,685 18,093 11,292 14,217 17,561 18,747 21,934 24,333

Ozempic

3,634 1,143 39 3,112 969 39 10 — — 512 174 — 17,577 10,094 1,757 16,650 9,599 1,634 21,211 11,237 1,796

Rybelsus

36 — — 36 — — — — — — — — 1,837 50 — 1,826 50 — 1,873 50 —

Total GLP-1 10,765 8,392 6,279 7,399 5,682 4,376 1,043 898 521 2,323 1,812 1,382 31,066 24,829 19,850 29,768 23,866 19,195 41,831 33,221 26,129

Other Diabetes care 2,946 3,389 3,360 725 1,052 1,064 1,546 1,647 1,672 675 690 624 1,085 858 890 943 705 733 4,031 4,247 4,250

Total Diabetes care 52,063 48,188 43,123 26,488 24,709 22,286 13,642 12,510 11,061 11,933 10,969 9,776 50,349 48,973 46,912 47,857 46,825 45,234 102,412 97,161 90,035

Obesity care (Saxenda

) 2,118 2,083 1,211 1,124 981 547 10 9 1 984 1,093 663 3,490 3,596 2,658 3,230 3,348 2,446 5,608 5,679 3,869

Diabetes and Obesity care total 54,181 50,271 44,334 27,612 25,690 22,833 13,652 12,519 11,062 12,917 12,062 10,439 53,839 52,569 49,570 51,087 50,173 47,680 108,020 102,840 93,904

Biopharm segment:

Haemophilia 5,708 5,946 5,572 3,579 3,646 3,604 361 284 199 1,768 2,016 1,769 3,954 4,335 4,004 3,675 4,031 3,723 9,662 10,281 9,576

– of which NovoSeven

3,996 4,502 4,424 2,352 2,577 2,694 345 269 194 1,299 1,656 1,536 3,207 3,617 3,457 3,089 3,454 3,278 7,203 8,119 7,881

– of which NovoEight

1,127 1,143 1,046 790 844 836 16 15 5 321 284 205 335 382 308 312 358 291 1,462 1,525 1,354

Growth disorders (Norditropin

) 4,832 4,225 4,000 2,220 1,960 1,972 66 36 20 2,546 2,229 2,008 2,872 3,050 2,834 2,854 3,035 2,823 7,704 7,275 6,834

Other Biopharm 1,108 1,122 1,017 886 912 817 5 5 4 217 205 196 452 503 500 208 247 262 1,560 1,625 1,517

Biopharm total 11,648 11,293 10,589 6,685 6,518 6,393 432 325 223 4,531 4,450 3,973 7,278 7,888 7,338 6,737 7,313 6,808 18,926 19,181 17,927

Total sales by geographical area 65,829 61,564 54,923 34,297 32,208 29,226 14,084 12,844 11,285 17,448 16,512 14,412 61,117 60,457 56,908 57,824 57,486 54,488 126,946 122,021 111,831

Total sales growth as reported 6.9% 12.1% 2.3% 6.5% 10.2% 2.5% 9.7% 13.8% 5.4% 5.7% 14.6% (0.3%) 1.1% 6.2% (1.9%) 0.6% 5.5% (2.4%) 4.0% 9.1% 0.1%

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 55

2.3 Research and development costs

DKK million 2020 2019 2018

Employee costs (note 2.4) 6,269 5,968 6,288

Amortisation and impairment

losses, intangible assets (note 3.1) 1,025 522 769

Depreciation and impairment

losses, property, plant and

equipment (note 3.1) 724 783 468

Other research and

development costs 7,444 6,947 7,280

Total research and development

costs 15,462 14,220 14,805

As percentage of net sales 12.2% 11.7% 13.2%

Novo Nordisk’s research and development is mainly focused on:

– Insulins, GLP-1s and other therapeutic new antidiabetic drugs for diabetes

treatment.

– GLP-1s, combinations and new modes of action for Obesity care.

– Blood-clotting factors and new modes of action for treatment of

haemophilia and other rare blood disorders.

– Human growth hormone and new modes of action for treatment of growth

disorders and other rare endocrine disorders.

– New modes of action including GLP-1 and stem cells for treatment of

NASH, cardiovascular disease, Alzheimer's disease, chronic kidney disease

and Parkinson's disease, among others.

The research activities mainly utilise biotechnological methods based on

advanced protein chemistry and protein engineering. These methods have

played a key role in the development of the production technology used to

manufacture insulin, GLP-1, recombinant blood-clotting factors and human

growth hormone. Research activities further focus on new technology

platforms including stem cells and developing RNAi therapies for liver-

related cardio-metabolic diseases.

Research and development activities are carried out by Novo Nordisk’s

research and development centres, mainly in Denmark, the US, the UK and

China. Clinical trials are carried out all over the world. Novo Nordisk also

enters into partnerships and licence agreements.

Accounting policies

Novo Nordisk expenses all research costs. In line with industry practice,

internal and subcontracted development costs are also expensed as

they are incurred, due to signicant regulatory uncertainties and other

uncertainties inherent in the development of new products. This means that

they do not qualify for capitalisation as intangible assets until marketing

approval by a regulatory authority is obtained or considered highly probable.

Costs for post-approval activities that are required by authorities as a

condition for obtaining regulatory approval are recognised as research and

development costs.

Research and development costs primarily comprise employee costs,

and internal and external costs related to execution of studies, including

manufacturing costs and facility costs of the research centres. The costs

also comprise amortisation, depreciation and impairment losses related

to software and property, plant and equipment used in the research and

development activities. Impairment losses recognised on intangible assets

not yet available for use related to research and development projects are

presented in research and development costs.

Certain research and development activities are recognised outside research

and development costs:

– Royalty expenses paid to partners after regulatory approval are expensed

as cost of goods sold.

– Royalty income received from partners is recognised as part of other

operating income, net.

– Contractual research and development obligations to be paid in the future

are disclosed separately as commitments in note 5.2.

2.4 Employee costs

DKK million 2020 2019 2018

Wages and salaries 26,778 25,335 25,259

Share-based payment costs

(note 5.1) 823 363 414

Pensions – dened contribution

plans 1,961 1,910 1,791

Pensions – dened benet plans

(note 3.5) 138 151 73

Other social security contributions 1,862 1,963 1,901

Other employee costs 2,044 2,203 2,087

Total employee costs for the year 33,606 31,925 31,525

Employee costs capitalised as

intangible assets and property,

plant and equipment (1,279) (1,314) (1,500)

Change in employee costs

capitalised as inventories (60) (139) (105)

Total employee costs

in the income statement 32,267 30,472 29,920

Included in the income statement:

Cost of goods sold 8,896 8,134 8,164

Sales and distribution costs 14,146 13,463 12,214

Research and development costs 6,269 5,968 6,288

Administrative costs 2,848 2,679 2,755

Other operating income, net 108 228 499

Total employee costs in the

income statement 32,267 30,472 29,920

Number of employees 2020 2019 2018

Average number of

full-time employees 43,759 42,218 42,881

Year-end number of

full-time employees 44,723 42,703 42,672

Employees (total) 45,323 43,258 43,202

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 56

2.5 Other operating income, net

Accounting policies

Other operating income, net, comprises licence income and income of

a secondary nature in relation to the main activities of Novo Nordisk.

Licence income from royalties on net sales is recognised as the underlying

customers' sale occurs and from sales milestones once the contingent

sale milestone is achieved in accordance with the terms of the relevant

agreement. Income from the transfer of the right to use intellectual property

may contain development or regulatory milestones (variable consideration)

on which the income is recognised when the signicant uncertainties in

achieving the milestones are resolved, due to the signicant uncertainties

inherent in the development of pharmaceutical products. Operating prot

from the wholly owned subsidiary NNE A/S, not related to Novo Nordisk’s

main activities, is recognised as other operating income. Other operating

income also includes income from sale of intellectual property rights.

Remuneration to Executive Management and Board of Directors

DKK million 2020 2019 2018

Salary and short-term incentive 119 120 102

Pension 26 26 22

Benets 10 14 4

Long-term incentive

52 40 22

Severance payments — — 28

Executive Management in total

207 200 178

Fee to Board of Directors

17 19 17

Total 224 219 195

1. Please refer to note 5.1 for further information.

2. Total remuneration for registered members of Executive Management amounts to

DKK 141 million (DKK 135 million in 2019 and DKK 142 million in 2018). All members of

the Board of Directors are registered.

Accounting policies

Wages, salaries, social security contributions, annual leave and sick leave,

bonuses and non-monetary benets are recognised in the year in which

the associated services are rendered by employees of Novo Nordisk. Where

Novo Nordisk provides long-term employee benets, the costs are accrued

to match the rendering of the services by the employees concerned.

2.6 Income taxes and deferred income taxes

Income taxes expensed

DKK million 2020 2019 2018

Current tax on prot for the year 11,557 11,275 10,469

Deferred tax on prot for the year 1,105 (1,559) (1,007)

Tax on prot for the year 12,662 9,716 9,462

Current tax adjustments

recognised for prior years (563) (191) (522)

Deferred tax adjustments

recognised for prior years (1,107) 77 47

Income taxes in the

income statement 10,992 9,602 8,987

Tax on other comprehensive

income for the year,

(income)/expense 577 231 (755)

Computation of eective tax rate

DKK million 2020 2019 2018

Statutory corporate income tax

rate in Denmark 22.0% 22.0% 22.0%

Deviation in foreign subsidiaries’

tax rates compared to the Danish

tax rate (net) (2.5%) (2.1%) (1.9%)

Non-taxable income less non-tax-

deductible expenses (net) (0.2%) 0.1% (0.2%)

Other adjustments (net) 1.4% (0.2%) (1.0%)

Eective tax rate 20.7% 19.8% 18.9%

The deviation in foreign subsidiaries' tax rates from the Danish tax rate is

mainly driven by Swiss business activities.

Other adjustments in 2020 comprise of tax related to acquisitions and

subsequent transfers of intellectual property rights (around 4%) countered

by clarication of tax uncertainties, settlement of tax cases and adjustment

of prior years.

Income taxes paid

DKK million 2020 2019 2018

Income taxes paid in Denmark for

current year 4,262 7,774 6,640

Income taxes paid outside

Denmark for current year 4,508 2,258 2,376

Income taxes paid/repayments

relating to prior years 1,336 904 598

Income taxes paid 10,106 10,936 9,614

In 2020, income taxes paid in Denmark and paid outside Denmark are

impacted by transfers of intellectual property rights related to acquisitions.

Swiss tax reform

In 2019, a tax reform was passed in Switzerland. The tax reform has a minor

positive impact on the eective tax rate, driven by a non-recurring increase

to deferred tax assets.

Accounting policies

The tax expense for the period comprises current and deferred tax. It also

includes adjustments to previous years and changes in provisions for uncertain

tax positions. Tax is recognised in the income statement except to the extent

that it relates to items recognised in equity or other comprehensive income.

Provisions for ongoing tax disputes are included as part of deferred tax

assets, tax receivables and tax payables.

Deferred income taxes arise from temporary dierences between the

accounting and tax values of the individual consolidated companies and

from realisable tax loss carry-forwards. The tax value of tax loss carry-

forwards is included in deferred tax assets to the extent that these 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 assumed in

the year in which the assets are expected to be utilised.

In general, the Danish tax rules related to dividends from group companies

provide exemption from tax for most repatriated prots. A provision for

withholding tax is only recognised if a concrete distribution of dividends

is planned. The unrecognised potential withholding tax amounts to DKK

337 million (DKK 315 million in 2019).

The value of future tax deductions in relation to share programmes is

recognised as deferred tax, until the shares are paid out to the employees.

Any estimated excess tax deduction compared to the costs realised in the

income statement is charged to equity.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 57

Management judgement regarding recognition of deferred income tax

assets and provisions for uncertain tax positions

Novo Nordisk is subject to income taxes around the world. Signicant

judgement and estimates are required in determining the worldwide accrual

for income taxes, deferred income tax assets and liabilities, and provisions

for uncertain tax positions.

Novo Nordisk recognises deferred income tax assets if it is probable that

sucient taxable income will be available in the future, against which the

temporary dierences and unused tax losses can be utilised.

Management has considered future taxable income and applied its

judgement in assessing whether deferred income tax assets should be

recognised.

In the course of conducting business globally, tax and transfer pricing

disputes with tax authorities may occur. Management judgement is applied

to assess the possible outcome of such disputes. The 'most probable

outcome' method is applied when making provisions for uncertain tax

positions, and Novo Nordisk considers the provisions made to be adequate.

However, the actual obligation may deviate and depends on the result of

litigation and settlements with the relevant tax authorities.

Development in deferred income tax assets and liabilities

DKK million

Property,

plant and

equipment

Intangible

assets Inventories

Liabilities Other

Oset

within

countries Total

2020

Net deferred tax asset/(liability) at 1 January (1,591) (718) 1,811 3,452 1,087 — 4,041

Income/(charge) to the income statement (47) (2,883) 963 1,449 520 2

Income/(charge) to other comprehensive income — 92 (216) 16 (469) (577)

Income/(charge) to equity — (92) — — 20 (72)

Acquisition of subsidiaries — — — — 276 276

Eect of exchange rate adjustment 24 1 (2) (300) (30) (307)

Net deferred tax asset/(liability) at 31 December (1,614) (3,600) 2,556 4,617 1,404 — 3,363

Classied as follows:

Deferred tax asset at 31 December 755 46 2,568 4,895 2,903 (5,302) 5,865

Deferred tax liability at 31 December (2,369) (3,646) (12) (278) (1,499) 5,302 (2,502)

2019

Net deferred tax asset/(liability) at 1 January (703) (564) 973 2,402 667 — 2,775

Change in accounting policy, leases (865) — — 865 — —

Income/(charge) to the income statement (5) (155) 820 133 689 1,482

Income/(charge) to other comprehensive income — — 18 47 (296) (231)

Income/(charge) to equity — — — — 18 18

Disposal of subsidiaries — — — (18) — (18)

Eect of exchange rate adjustment (18) 1 — 23 9 15

Net deferred tax asset/(liability) at 31 December (1,591) (718) 1,811 3,452 1,087 — 4,041

Classied as follows:

Deferred tax asset at 31 December 769 58 3,428 3,580 1,843 (5,557) 4,121

Deferred tax liability at 31 December (2,360) (776) (1,617) (128) (756) 5,557 (80)

The total tax value of unrecognised tax loss carry-forwards amounts to DKK 628 million in 2020 (DKK 144 million in 2019).

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 58

3.1 Intangible assets and property, plant and

equipment

Of total property, plant and equipment and intangible assets, DKK 44,431

million is located in Denmark (DKK 28,322 million in 2019) and DKK 18,750

million is located in the US (DKK 20,256 million in 2019) where the Group's

main production, lling, packaging, moulding, assembly facilities and

intangible assets are located.

Section 3

Operating assets

and liabilities

DKK million

Patents

and

licences

Software

and other

intangibles

Total

intangible

assets

Land and

buildings

Plant and

machinery

Other

equipment

Assets

under

construction

Property,

plant and

equipment

2020

Cost at the beginning of the year 7,270 2,560 9,830 30,260 27,594 6,215 20,351 84,420

Additions during the year 15,906 396 16,302 741 506 490 4,560 6,297

Disposals during the year (698) — (698) (119) (583) (122) (16) (840)

Transfer and reclassications — — — 7,440 4,586 515 (12,541) —

Eect of exchange rate adjustment (74) (20) (94) (813) (600) (222) (1,556) (3,191)

Cost at the end of the year 22,404 2,936 25,340 37,509 31,503 6,876 10,798 86,686

Amortisation/depreciation and impairment losses at the

beginning of the year 2,643 1,352 3,995 11,528 18,888 3,453 — 33,869

Amortisation/depreciation for the year 889 207 1,096 1,859 1,500 821 — 4,180

Impairment losses for the year 350 — 350 14 69 28 16 127

Amortisation/depreciation and impairment losses

reversed on disposals during the year (698) — (698) (119) (581) (115) (16) (831)

Eect of exchange rate adjustment (49) (11) (60) (346) (432) (150) — (928)

Amortisation/depreciation and impairment losses at the

end of the year 3,135 1,548 4,683 12,936 19,444 4,037 — 36,417

Carrying amount at the end of the year 19,269 1,388 20,657 24,573 12,059 2,839 10,798 50,269

2019

Cost at the beginning of the year 5,247 2,412 7,659 25,401 25,412 4,779 16,846 72,438

Change in accounting policy, leases — — — 3,291 — 487 — 3,778

Additions during the year 1,958 221 2,179 555 350 498 7,580 8,983

Disposals during the year — (79) (79) (407) (504) (244) (74) (1,229)

Transfer and reclassications — — — 1,277 2,248 665 (4,190) —

Eect of exchange rate adjustment 65 6 71 143 88 30 189 450

Cost at the end of the year 7,270 2,560 9,830 30,260 27,594 6,215 20,351 84,420

Amortisation/depreciation and impairment losses at the

beginning of the year 1,390 1,124 2,514 9,770 17,871 2,906 — 30,547

Amortisation/depreciation for the year 312 175 487 1,818 1,410 743 — 3,971

Impairment losses for the year 914 68 982 57 70 20 74 221

Amortisation/depreciation and impairment losses

reversed on disposals during the year — (18) (18) (160) (504) (229) (74) (967)

Eect of exchange rate adjustment 27 3 30 43 41 13 — 97

Amortisation and impairment losses at the end of the year 2,643 1,352 3,995 11,528 18,888 3,453 — 33,869

Carrying amount at the end of the year 4,627 1,208 5,835 18,732 8,706 2,762 20,351 50,551

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 59

Intangible assets

Amortisation and impairment losses

DKK million 2020 2019 2018

Cost of goods sold 369 916 208

Sales and distribution costs 40 24 15

Research and development costs 1,025 522 769

Administrative costs 10 3 2

Other operating income, net 2 4 6

Total amortisation and

impairment loss 1,446 1,469 1,000

Total amortisation 1,096 487 1,000

Total impairment losses 350 982 —

2020 additions

In 2020 Novo Nordisk acquired Corvidia Therapeutics Inc., in a transaction

accounted for as an asset acquisition. An addition of DKK 4,580 million was

recognised in patents and licences for the acquisition of Ziltivekimab, a fully

human monoclonal antibody directed against Interleukin-6 related to chronic

kidney disease, which is under development.

Novo Nordisk acquired Emisphere Technologies Inc. and obtained ownership of

the Eligen

SNAC oral delivery technology. Novo Nordisk and Emisphere have

collaborated since 2007 and Emisphere’s proprietary drug delivery technology

Eligen

SNAC is used by Novo Nordisk under an existing licence agreement in

the oral formulation of Novo Nordisk’s GLP-1 receptor agonist semaglutide,

which is marketed and sold under the brand name Rybelsus

. Under the

terms of the agreement, Novo Nordisk acquired all outstanding shares of

Emisphere for USD 1,335 million. As part of the transaction, Novo Nordisk also

acquired related Eligen

SNAC royalty stream obligations owed to MHR Fund

Management LLC (MHR), the largest shareholder of Emisphere, for USD 450

million. The transaction has been accounted for as an asset acquisition, with

DKK 11,060 million recognised in patents and licences, of which DKK 2,467

million are related to assets under development. At 31 December 2020, the

carrying amount of acquired intangible assets related to Rybelsus is DKK 7,716

million, which has a remaining amortisation period of 14 years.

Of the total addition of intangible assets in 2020 DKK 396 million is internally

developed (DKK 221 million in 2019).

Accounting policies

Patents and licences, including patents and licences acquired for research

and development projects, are carried at historical cost less accumulated

amortisation and any impairment loss. Upfront fees and acquisition costs are

capitalised and subsequent milestone payments payable on achievement

of a contingent event will be capitalised on the contingent event being

probable of being achieved.

Amortisation is based on the straight-line method over the estimated useful

life. This means the legal duration or the economic useful life depending on

which is shorter, and not exceeding 15 years. The amortisation of patents

and licences begins after regulatory approval has been obtained.

Internal development of software for internal use are recognised as

intangible assets if the recognition criteria are met, for example a signicant

business system where the expenditure leads to the creation of a durable

asset. Amortisation is based on the straight-line method over the estimated

useful life of 3-15 years. The amortisation begins when the asset is in the

location and condition necessary for it to be capable of operating in the

manner intended by Management.

Research and development projects

Internal and subcontracted research costs are charged in full to the

consolidated income statement in the period in which they are incurred.

Consistent with industry practice, development costs are also expensed until

regulatory approval is obtained or is probable; please refer to note 2.3.

Payments to third parties under collaboration and licence agreements

are assessed for the substance of their nature. Payments which represent

subcontracted research and development are expensed as the services are

received. Payments which represent rights to the transfer of intellectual

property, developed at risk by the third party, are capitalised.

For acquired research and development projects, patents and licences, the

likelihood of obtaining future commercial sales is reected in the cost of the

asset, and thus the probability recognition criteria is always considered to

be satised. As the cost of acquired research and development projects can

often be measured reliably, these projects full the capitalisation criteria as

intangible assets on acquisition. Subsequent milestone payments payable

on achievement of a contingent event (e.g. commencement of phase 3

trials) are accrued and capitalised into the cost of the intangible asset when

the achievement of the event is probable. Development costs incurred

subsequent to acquisition are treated consistently with internal project

development costs.

Assets that are subject to amortisation are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying

amount may not be recoverable.

Factors considered material that could trigger an impairment test include

the following:

– Development of a competing drug.

– Changes in the legal framework covering patents, rights and licences.

– Advances in medicine and/or technology that aect the medical treatments.

– Lower-than-predicted sales.

– Adverse impact on reputation and/or brand names.

– Changes in the economic lives of similar assets.

– Relationship to other intangible assets or property, plant and equipment.

– Changes or anticipated changes in participation rates or reimbursement

policies.

If the carrying amount of intangible assets exceeds the recoverable amount

based on the existence of one or more of the above indicators of impairment,

any impairment is measured based on discounted projected cash ows.

Impairments are reviewed at each reporting date for possible reversal.

Key accounting estimates and judgements on intangible assets

In 2020, an impairment loss of DKK 350 million (DKK 982 million in 2019) was

recognised, substantially all of which related to patents and licences. DKK 350

million (DKK 282 million in 2019) of the impairment was related to the Diabetes

and Obesity care segment and none related to Biopharm (DKK 700 million

in 2019). All the impairment loss in 2020 was recognised in research and

development costs (DKK 529 million in cost of goods sold and DKK 450 million

in research and development costs in 2019). The impairment was a result of

Management’s review of expectations related to patents and licences not yet in

use. No impairment related to marketable products was identied in 2020.

Intangible assets with an indenite useful life and intangible assets not yet

available for use are not subject to amortisation. They are tested annually for

impairment, irrespective of whether there is any indication that they may be

impaired.

Intangible assets not yet being amortised amounts to DKK 9,607 million (DKK

3,380 million in 2019), primarily patents and licences in relation to research

and development projects. Impairment tests in 2020 and 2019 of patents and

licences not yet in use are based on Management’s projections and anticipated

net present value of estimated future cash ows from marketable products.

Terminal values used are based on the expected life of products, forecasted

life cycle and cash ow over that period, and the useful life of the underlying

assets. In addition, Management makes judgements related to intangible

assets when assessing whether a transaction is a business combination or

an asset acquisition. An asset acquisition will arise when substantially all

the transaction value is concentrated in a single asset or when there are no

substantive business processes in the acquired entity. Judgements are also

made in evaluating whether payments under collaboration arrangements are

acquisition of assets or prepayment of R&D services.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 60

Property, plant and equipment

Depreciation and impairment losses

DKK million 2020 2019 2018

Cost of goods sold 2,729 2,656 2,312

Sales and distribution costs 403 354 69

Research and development costs 724 783 468

Administrative costs 433 376 70

Other operating income, net 18 23 6

Total depreciation and

impairment losses 4,307 4,192 2,925

Capital expenditure in the reporting period was primarily related to

investments in facility upgrades and new production facilities for active

pharmaceutical ingredients for diabetes, mainly the facility in Clayton, US.

The facility in Clayton is intended to strengthen the Novo Nordisk supply

chain. Capital expenditure also related to investments in facility upgrades

of the purication plant in Kalundborg and investments were also made to

establish additional API capacity in Kalundborg. Finally, capital expenditure

related to the establishment of an oral tablet facility near Durham, US for

launch and commercial manufacturing of tablets.

Accounting policies

Property, plant and equipment is measured at historical cost less

accumulated depreciation and any impairment loss. The cost of self-

constructed assets includes costs directly and indirectly attributable to the

construction of the assets. Any subsequent cost is included in the asset’s

carrying amount or recognised as a separate asset only when it is probable

that future economic benets associated with the item will ow to Novo

Nordisk and the cost of the item can be measured reliably. Depreciation

is based on the straight-line method over the estimated useful lives of the

assets (buildings: 12-50 years, plant and machinery: 5-25 years and other

equipment: 3-10 years. Land is not depreciated).

The depreciation commences when the asset is available for use, i.e. when it is

in the location and condition necessary for it to be capable of operating in the

manner intended by Management. The assets’ residual values and useful lives

are reviewed and adjusted, if appropriate, at the end of each reporting period.

If an asset’s carrying amount is higher than its estimated recoverable amount,

it is written down to the recoverable amount. Plant and equipment with no

alternative use developed as part of a research and development project are

expensed. However, plant and equipment with an alternative use or used for

general research and development purposes are capitalised and depreciated

over the estimated useful life as research and development costs.

3.2 Leases

Right-of-use assets in the balance sheet

DKK million

Land and

buildings

Other

equipment Total

2020

Balance at 1 January 3,029 503 3,532

Additions during the year 660 318 978

Depreciation for the year (644) (320) (964)

Eect of exchange rate adjustment (144) (22) (166)

Balance at 31 December 2,901 479 3,380

2019

Balance at 1 January 3,291 487 3,778

Additions during the year 333 307 640

Depreciation for the year (564) (288) (852)

Eect of exchange rate adjustment (31) (3) (34)

Balance at 31 December 3,029 503 3,532

Amounts recognised in the income statement

DKK million 2020 2019

Depreciation 964 852

Interest on lease liabilities 97 108

Variable lease expenses 135 113

Short-term leases 98 201

Lease of low value assets 79 63

Total amounts recognised in the

income statement 1,373 1,337

In 2020 the total cash outow for leases amounted to DKK 1,367 million

(DKK 1,295 million in 2019). Please refer to note 4.4 for a maturity analysis of

lease payments. The lease costs for 2018 were DKK 1,299 million.

Accounting policies

Novo Nordisk mainly leases oce buildings, warehouses, laboratories and

vehicles. The right-of-use asset is presented in property, plant and equipment

and the lease liability in borrowings.

For contracts which are, or contain, a lease, the Group recognises a right-of-

use asset and a lease liability. The right-of-use asset is initially measured at

cost, being the initial amount of the lease liability. The right-of-use asset is

subsequently depreciated using the straight-line method over the lease term.

The right-of-use asset is periodically adjusted for certain remeasurements of

the lease liability and reduced by any impairment losses.

The lease term determined by the Group is the non-cancellable period of a

lease, together with extension/termination option if these are reasonably certain

to be exercised. When determining the term, Management considers multiple

factors that create economic incentives to exercise an option to extend the

lease or not to terminate the lease, including termination penalties, potential

relocation costs and whether signicant leasehold improvements have been

capitalised on the lease, with a remaining useful life which exceeds the xed

minimum duration of the lease. For contracts with a rolling term (evergreen

leases), the Group estimates the leasing period to be equal to the termination

period if no probable scenario exists for estimating the leasing period.

The lease liability is initially measured at the present value of the lease

payments outstanding at the commencement date, discounted using the

incremental borrowing rate. The lease liability is measured using the eective

interest method. Variable lease payments not based on an index or a rate

are recognised as an expense in the income statement as incurred. Residual

value guarantees that are expected to be paid are included in the initial

measurement of the lease liability.

The lease liability is remeasured when there is a change in future lease

payments, typically due to a change in index or rate (e.g. ination) on property

leases, or if there is a reassessment of whether an extension or termination

option will be exercised. A corresponding adjustment is made to the right-of-

use asset, or in the income statement when the right-of-use asset has been

fully depreciated.

New lease contracts with a lease term of 12 months or less and lease of low

value assets are not recognised on the balance sheet. These are expensed

on a straight-line basis over the lease term or another systematic basis.

Lease of low value assets include personal computers, telephones and small

items of oce equipment.

As of 31 December 2020, the lease liability excludes DKK 2,363 million

(undiscounted) of potential lease payments related to lease term extension

rights on properties which were not considered reasonably certain to be

exercised (DKK 2,760 million in 2019).

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 61

3.3 Inventories

DKK million 2020 2019

Raw materials 3,326 2,842

Work in progress 12,252 11,375

Finished goods 5,111 4,850

Total inventories (gross) 20,689 19,067

Write-downs at year-end (2,153) (1,426)

Total inventories (net) 18,536 17,641

Indirect production costs included in work in

progress and nished goods 9,703 9,216

Share of total inventories (net) 52% 52%

Movements in inventory write-downs:

Write-downs at the beginning of the year 1,426 1,959

Write-downs during the year 1,628 414

Utilisation of write-downs (528) (68)

Reversal of write-downs (373) (879)

Write-downs at the end of the year 2,153 1,426

All write-downs in both 2020 and 2019 relate to fully impaired inventory.

In 2019 a reversal of write-down on prelaunch inventory with a net positive

income statement eect of DKK 510 million on research and development

costs was recognised.

Accounting policies

Inventories are stated at cost or net realisable value, whichever is lower.

Cost is determined using the rst-in, rst-out method. Cost comprises direct

production costs such as raw materials, consumables and labour as well

as indirect production costs. Production costs for work in progress and

nished goods include indirect production costs such as employee costs,

depreciation, maintenance, etc. If the expected sales price less completion

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 (prelaunch inventory)

is capitalised but immediately provided for, until there is a high probability of

regulatory approval for the product. A write-down is made against inventory,

and the cost is recognised in the income statement as research and

development costs. Once there is a high probability of regulatory approval

being obtained, the write-down is reversed, up to no more than the original

cost.

Key accounting estimate of indirect production costs capitalised and

inventory write-downs

Indirect production costs account for approximately 50% of the net

inventory value, reecting a lengthy production process compared with

low direct raw material costs. The production of both Diabetes and Obesity

care and Biopharm products is highly complex from fermentation to

purication and formulation, including quality control of all production

processes. Furthermore, the process is very sensitive to manufacturing

conditions. These factors all inuence the parameters for capitalisation of

indirect production costs at Novo Nordisk and the full cost of the products.

Indirect production costs are measured using a standard cost method. This

is reviewed regularly to ensure relevant measures of capacity utilisation,

production lead time, cost base and other relevant factors, hence inventory

is valued at actual cost. When calculating total inventory, Management must

make judgements about cost of production, standard cost variances and idle

capacity in estimating indirect production costs for capitalisation. Changes

in the parameters for calculation of indirect production costs could have an

impact on the gross margin and the overall valuation of inventories.

3.4 Trade receivables

DKK million

Gross

carrying

amount

Loss

allowance

Net

carrying

amount

2020

Not yet due 27,511 (805) 26,706

1-90 days 1,000 (112) 888

91-180 days 188 (63) 125

181-270 days 44 (29) 15

271-360 days 51 (51) —

More than 360 days past due 320 (320) —

Trade receivables 29,114 (1,380) 27,734

EMEA 6,306 (781) 5,525

China 2,137 — 2,137

Rest of World 3,003 (580) 2,423

North America Operations 17,668 (19) 17,649

Trade receivables 29,114 (1,380) 27,734

2019

Not yet due 24,359 (763) 23,596

1-90 days 1,204 (127) 1,077

91-180 days 261 (69) 192

181-270 days 96 (49) 47

271-360 days 79 (79) —

More than 360 days past due 397 (397) —

Trade receivables 26,396 (1,484) 24,912

EMEA 7,104 (903) 6,201

China 1,760 — 1,760

Rest of World 3,084 (568) 2,516

North America Operations 14,448 (13) 14,435

Trade receivables 26,396 (1,484) 24,912

Movements in allowance for doubtful trade receivables

DKK million 2020 2019

Carrying amount at the beginning of the year 1,484 1,370

Reversal of allowance on realised losses (108) (45)

Net movement recognised in income statement 139 158

Eect of exchange rate adjustment (135) 1

Allowance at the end of the year 1,380 1,484

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 62

Novo Nordisk closely monitors the current economic conditions of countries

impacted by currency uctuations, high ination and an unstable political

climate. These indicators as well as payment history are taken into account

in the valuation of trade receivables.

During 2020 country risk ratings have been downgraded in a number of

countries. However, despite of the COVID-19 pandemic, Novo Nordisk has

not experienced signicant increases in collectability issues on individual

customers nor have we experienced signicant deterioration in the ageing

of receivables. Please refer to note 4.2 for the trade receivable programmes.

Accounting policies

Trade receivables are initially recognised at transaction price and

subsequently measured at amortised cost using the eective interest

method, less allowance for doubtful trade receivables. The allocation of

trade receivables and allowance for trade receivables is based on the

location of the customer.

Before being sold, trade receivables in factoring portfolios are measured at fair

value with changes recognised in other comprehensive income. The allowance

for doubtful receivables 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. Subsequent recoveries of amounts

previously written o are credited against sales and distribution costs.

Novo Nordisk’s customer base comprises government agencies,

wholesalers, retail pharmacies and other customers. Management makes

allowance for doubtful trade receivables based on the simplied approach

to provide for expected credit losses, which permits the use of the lifetime

expected loss provision for all trade receivables. The allowance is an

estimate based on shared credit risk characteristics and the days past due.

Generally, invoices are due for payment within 90 days from shipment of

goods. Loss allowance is calculated using an ageing factor, geographical

risk and specic customer knowledge. The allowance is based on a provision

matrix on days past due and a forward looking-element relating mainly to

incorporation of the Dun & Bradstreet country risk rating and an individual

assessment. Please refer to note 4.2 for a general description of credit risk.

3.5 Retirement benet obligations

Net retirement benet obligations

DKK million 2020 2019

Retirement benet obligations 2,624 2,508

Fair value of plan assets 1,225 1,174

Net retirement benet obligations

at the end of the year 1,399 1,334

Key assumptions used for valuation and sensitivity analysis

DKK million

Key

assumptions

1%-point

increase

1%-point

decrease

2020

Discount rate (decrease)/increase 1.0% (403) 523

Future remuneration growth

(decrease)/increase 2.2% 116 (101)

2019

Discount rate (decrease)/increase 1.3% (366) 465

Future remuneration growth

(decrease)/increase 2.4% 105 (94)

The sensitivities consider the single change shown, with the other

assumptions assumed to be unchanged. The table shows the NPV impact of

net retirement liabilities.

Dened contribution plans

Novo Nordisk operates a number of dened contribution plans throughout

the world. These plans are externally funded in entities that are legally

separate from the Group.

Dened benet plans

In a few countries, Novo Nordisk operates dened benet plans, primarily

located in the US, Germany, Switzerland and Japan. In Germany and

Switzerland, the dened benet plans are partly reimbursed by international

insurance companies. The risk related to the plan assets in these countries

is therefore limited to counterparty risk against these insurance companies.

The total cost recognised for the year amounts to DKK 138 million (DKK 151

million in 2019).

The present value of partly funded retirement benet obligations amounts

to DKK 1,953 million (DKK 1,845 million in 2019). The present value of

unfunded retirement benet obligations amounts to DKK 671 million (DKK

663 million in 2019).

Net remeasurement is a loss of DKK 67 million (loss of DKK 187 million in

2019), primarily related to changes in nancial assumptions (discount rate),

and is included in other comprehensive income.

Please refer to note 5.2 for a maturity analysis of the net retirement benet

obligation. Novo Nordisk does not expect the contributions over the next

ve years to dier signicantly from current contributions.

Accounting policies

Dened contribution plans

Novo Nordisk’s contributions to the dened contribution plans are charged

to the income statement in the year to which they relate.

Dened benet plans

The costs for the year for dened benet plans are determined using the

projected unit credit method. This reects services rendered by employees

to the valuation dates and is based on actuarial assumptions primarily

regarding discount rates used in determining the present value of benets

and projected rates of remuneration growth. Discount rates are based on

the market yields of high-rated corporate bonds in the country concerned.

Actuarial gains and losses arising from experience adjustments and changes

in actuarial assumptions are charged or credited to other comprehensive

income in the period in which they arise. Past service costs are recognised

immediately in the income statement.

Pension plan assets are only recognised to the extent that Novo Nordisk is

able to derive future economic benets such as refunds from the plan or

reductions of future contributions.

Costs recognised for retirement benets are included in cost of goods

sold, sales and distribution costs, research and development costs, and

administrative costs. The net obligation recognised in the balance sheet is

reported as non-current liabilities.

Actuarial valuations are performed annually for all major dened benet

plans. Assumptions regarding future mortality are based on actuarial advice

in accordance with published statistics and experience in each country.

Other assumptions such as medical cost trend rate and ination are also

considered in the calculation. Signicant actuarial assumptions for the

determination of the retirement benet obligation (not considering plan

assets) are discount rate and expected future remuneration increases. The

sensitivity analysis has been determined based on reasonably likely changes

in the assumptions occurring at the end of the period.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 63

3.6 Provisions and contingent liabilities

DKK million

Provisions

for sales

rebates

Provisions

for legal

disputes

Provisions

for product

returns

Other

provisions

2020

total

2019

total

At the beginning of the year 30,878 2,375 1,082 1,398 35,733 29,553

Additional provisions, including increases to existing provisions 111,921 662 413 814 113,810 104,621

Amount used during the year (106,116) (364) (694) (46) (107,220) (99,244)

Adjustments, including unused amounts reversed during the year 166 — (6) (82) 78 148

Eect of exchange rate adjustment (2,797) (222) — (42) (3,061) 655

At the end of the year 34,052 2,451 795 2,042 39,340 35,733

Non-current liabilities

301 2,209 293 1,723 4,526 4,613

Current liabilities 33,751 242 502 319 34,814 31,120

1. Provisions for sales rebates are related to US Managed Care, Medicare, Medicaid and other minor US rebate types, as well as rebates in a number of European countries and Canada.

2. Other provisions consists of various types of provision, including obligations in relation to employee benets such as jubilee benets, company-owned life insurance, etc.

3. For non-current liabilities, provision for sales rebates is expected to be settled after one year, provisions for product returns will be utilised in 2022 and 2023. In the case of provisions

for legal disputes, the timing of settlement cannot be determined.

Contingent liabilities

Novo Nordisk is currently involved in pending litigations, claims and

investigations arising out of the normal conduct of its business. While

provisions that Management deems to be reasonable and appropriate

have been made for probable losses, there are uncertainties connected

with these estimates. Novo Nordisk does not expect the pending litigations,

claims and investigations, individually and in the aggregate, to have a

material impact on Novo Nordisk’s nancial position, operating prot or cash

ow in addition to the amounts accrued as provision for legal disputes.

Pending litigation against Novo Nordisk

Novo Nordisk, along with the majority of incretin-based product

manufacturers in the United States, is a defendant in product liability

lawsuits related to use of incretin-based medications. As of 1 February

2021, 384 plaintis have named Novo Nordisk in product liability lawsuits,

predominantly claiming damages for pancreatic cancer that allegedly

developed as a result of using Victoza

and other GLP-1/DPP-IV incretin-

based products. 236 of the Novo Nordisk plaintis have also named other

defendants in their lawsuits. Most Novo Nordisk plaintis have led suit in

California federal and state courts. Novo Nordisk does not currently have

any individual trials scheduled in 2021. Novo Nordisk does not expect the

pending claims to have a material impact on its nancial position, operating

prot or cash ow.

Since January 2017, several class action lawsuits have been led against

Novo Nordisk, former CEO Lars Rebien Sørensen, former CFO Jesper

Brandgaard and former President of Novo Nordisk Inc. Jakob Riis in the

United States District Court for the District of New Jersey on behalf of all

purchasers of Novo Nordisk American Depositary Receipts between February

2015 and February 2017. All lawsuits have been consolidated into one case.

The lawsuit alleges that Novo Nordisk articially inated its nancial results,

failed to disclose pricing pressure and rising rebate payments to PBMs, and

made other materially misleading statements to potential investors. Novo

Nordisk does not expect the litigation to have a material impact on Novo

Nordisk’s nancial position, operating prot or cash ow.

In August 2019, a securities lawsuit was led against Novo Nordisk in

Denmark by a number of institutional shareholders. The claim is for a total

amount of DKK 11.8 billion based on trading and holding of shares in Novo

Nordisk during the period between February 2015 and February 2017. The

lawsuit alleges that Novo Nordisk made misleading statements and did

not make appropriate disclosures regarding its sales of insulin products

in the US. It contains broadly similar allegations to those of the previously

disclosed securities class action lawsuit led in the US in 2017 on behalf of

all purchasers of Novo Nordisk American Depository Receipts. Novo Nordisk

does not expect the lawsuit to have a material impact on Novo Nordisk’s

nancial position, operating prot or cash ow.

Novo Nordisk is currently defending six lawsuits, including two plead as

putative class actions, relating to the pricing of diabetes medicines. Four

of these cases are pending in New Jersey federal court; the other two are

pending in Kentucky state court and Texas federal court. All pending matters

also name as defendants Eli Lilly and Company and Sano-Aventis U.S.

LLC; while certain matters also name Pharmacy Benet Managers (PBMs)

and related entities. Plaintis generally allege that the manufacturers and

PBMs colluded to articially inate list prices paid by consumers for diabetes

products, while oering reduced prices to PBMs through rebates used to

secure formulary access. Novo Nordisk does not expect the lawsuits to have

a material impact on Novo Nordisk’s nancial position, operating prot or

cash ow.

In 2016, Novo Nordisk US received a Civil Investigative Demand from

the U.S. Department of Justice (“DOJ CID”) relating to potential o-label

marketing of NovoSeven

(including high dose and for prophylactic use) and

interactions with physicians and patients. The DOJ investigation was likely

prompted by a lawsuit led by a former Novo Nordisk US employee (the

“Relator”) under seal in the Western District of Oklahoma in 2015. Relator

alleges Novo Nordisk US caused the submission of false claims to Medicare,

Medicaid, Federal Employees Health Benets Program and private insurers

in California as a result of the same conduct that was the subject of the DOJ

CID. As a result of these allegations, Relator (on behalf of the federal and

state governments) seeks injunctive and monetary relief. A consolidated

complaint was jointly led by relator and the State of Washington on 9

March 2020. The consolidated complaint was unsealed (made public) by the

court on 28 May 2020. Novo Nordisk has led two motions seeking dismissal

of the Complaint, both of which are currently pending and awaiting ruling

from the Court. Novo Nordisk does not expect the lawsuit to have a material

impact on Novo Nordisk’s nancial position, operating prot or cash ow.

Pending claims against Novo Nordisk and investigations involving

Novo Nordisk

Several authorities in the US have served Novo Nordisk with Civil

Investigative Demands (CIDs) or subpoenas calling for the production of

documents and information. Below is a list of ongoing matters:

– Washington Attorney General’s Oce CID (March 2017), relating to, among

other things, pricing and trade practices for insulin products, including

Levemir

, NovoLog

, and Novolin

, from 1 January 2005 through the

present date.

– New Mexico Attorney General’s Oce CID (April 2017), relating to, among

other things, trade practice and pricing of insulin products, namely

NovoLog

and Novolin

from 1 January 2012 through the present date.

– Texas Attorney General’s Oce CID (March 2019), relating to, among other

things, marketing and promotional practices for Ozempic

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 64

– New York State Attorney General’s Oce Subpoena (July 2019), relating to,

among other things, pricing and trade practices for insulin products, from

1 July 2013 through the present.

– Colorado Attorney General’s Oce CID (December2019), relating to,

among other things, pricing and trade practices for insulin products, for

the period from 1 January 2010 to present.

– State of California Oce of the Insurance Commissioner Subpoena (July

2020) related to Novo Nordisk’s patent and regulatory strategies for

Prandin

and Prandimet

in the US market, and the projected impact of

generic repaglinide on Novo Nordisk’s Prandin

and Prandimet

franchises

in the US.

– Mississippi Attorney General’s Oce Subpoena (December 2020), related

to, among other things, pricing and trade practices for insulin products,

including Levemir®, NovoLog

, and Novolin

, from 1 January 2005 through

the present date.

– Vermont Attorney General’s Oce Subpoena (December 2020), related to,

among other things, pricing and trade practices for insulin products sold by

Novo Nordisk during the period 1 January 2011 through the present date.

In all matters Novo Nordisk is cooperating with the authority in question.

Novo Nordisk does not expect the above investigations to have a material

impact on Novo Nordisk’s nancial position, operating prot or cash ow.

Novo Nordisk is one of several pharmaceutical companies that received

requests for information involving pricing practices for its diabetes products

from several committees of the Unites States House of Representatives

and/or United States Senate. Novo Nordisk is working with the sta of the

various committees to respond to their questions. Novo Nordisk does not

expect the inquiries to have a material impact on Novo Nordisk’s nancial

position, operating prot or cash ow.

Other contingent liabilities

In addition to the above, the Novo Nordisk Group is engaged in certain

litigation proceedings and various ongoing audits and investigations. In

the opinion of Management, neither settlement or continuation of such

proceedings, nor such pending audits and investigations, are expected to

have a material eect on Novo Nordisk’s nancial position, operating prot

or cash ow.

3.7 Other liabilities

Other liabilities primarily comprises employee cost payables, payables

related to non-current assets, and sales rebates.

Accounting policies

Provisions for sales rebates and discounts granted to government

agencies, wholesalers, retail pharmacies, Managed Care and other

customers are recorded at the time the related revenues are recorded

or when the incentives are oered. Provisions are calculated based on

historical experience and the specic terms in the individual agreements.

Unsettled rebates are recognised as provisions when the timing or

amount is uncertain. Where absolute amounts are known, the rebates

are recognised as other liabilities. Please refer to note 2.1 for further

information on sales rebates and provisions.

Provisions for legal disputes are recognised where a legal or constructive

obligation has been incurred as a result of past events and it is probable

that there will be an outow of resources that can be reliably estimated.

In this case, Novo Nordisk arrives at an estimate based on an evaluation

of the most likely outcome. Disputes for which no reliable estimate can be

made are disclosed as contingent liabilities.

Provisions are measured at the present value of the anticipated

expenditure for settlement. This is calculated using a pre-tax discount rate

that reects current market assessments of the time value of money and

the risks specic to the obligation. The increase in the provision for interest

is recognised as a nancial expense.

Novo Nordisk issues credit notes for expired goods as a part of normal

business. Where there is historical experience or a reasonably accurate

estimate of expected future returns can otherwise be made, a provision for

estimated product returns is recorded. The provision is measured at gross

sales value.

Key accounting estimate regarding ongoing legal disputes, litigation

and investigations

Provisions for legal disputes consist of various types of provision linked

to ongoing legal disputes. Management makes estimates regarding

provisions and contingencies, including the probability of pending and

potential future litigation outcomes. These are by nature dependent on

inherently uncertain future events. When determining likely outcomes of

litigation, etc., Management considers the input of external counsels on

each case, as well as known outcomes in case law.

Although Management believes that the total provisions for legal

proceedings are adequate based on currently available information, there

can be no assurance that there will not be any changes in facts or matters,

or that any future lawsuits, claims, proceedings or investigations will not

be material.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 65

Section 4

Capital structure

and nancial items

4.1 Earnings per share, distributions to shareholders,

treasury shares, share capital and other reserves

Earnings per share

DKK million 2020 2019 2018

Net prot 42,138 38,951 38,628

Average number of

shares outstanding

in million

shares 2,333.9 2,374.3 2,419.6

Dilutive eect of

average outstanding

share pool

in million

shares 6.1 4.4 4.8

Average number of

shares outstanding,

including dilutive

eect of outstanding

share pool

in million

shares 2,340.0 2,378.7 2,424.4

Basic earnings

per share DKK 18.05 16.41 15.96

Diluted earnings

per share DKK 18.01 16.38 15.93

1. For further information on the outstanding share pool, please refer to note 5.1.

Accounting policies

Earnings per share is presented as both basic and diluted earnings per

share. Basic earnings per share is calculated as net prot divided by the

monthly average number of shares outstanding. Diluted earnings per share

is calculated as net prot divided by the sum of monthly average number

of shares outstanding, including the dilutive eect of the outstanding share

pool. Please refer to ‘Financial denitions’ for a description of calculation of

the dilutive eect.

Cash distribution to shareholders

DKK million 2020 2019 2018

Interim dividend for the year 7,570 7,100 7,238

Dividend for prior year 12,551 12,309 11,810

Share repurchases for the year 16,855 15,334 15,567

Total 36,976 34,743 34,615

The net cash distribution to shareholders in the form of dividends and share

repurchases amounts to DKK 36,976 million, compared with a free cash

ow of DKK 28,565 million. This is in line with the guiding principle of paying

out excess capital to investors after funding organic growth and potential

acquisitions.

The total dividend for 2020 amounts to DKK 21,066 million (DKK 9.10 per

share). The 2020 nal dividend of DKK 13,496 million (DKK 5.85 per share) is

expected to be distributed pending approval at the Annual General Meeting.

The interim dividend of DKK 7,570 million (DKK 3.25 per share) was paid in

August 2020. The total dividend for 2019 was DKK 19,651 million (DKK 8.35

per share), of which the nal dividend of DKK 12,551 million (DKK 5.35 per

share) was paid in March 2020. No dividend is declared on treasury shares.

According to Danish corporate law, reserves available for distribution as

dividends are based on the nancial statements of the parent company,

Novo Nordisk A/S. Dividends are paid from distributable reserves. Share

premium is a distributable reserve, and any former share premium reserve

has been fully distributed. As at 31 December 2020, distributable reserves

total DKK 51,858 million (DKK 40,801 million in 2019), corresponding to the

parent company's retained earnings and cash ow hedge reserve.

Treasury shares 2020 2019

Market

value,

DKK million

Treasury

shares in %

Number of

B shares

of DKK 0.20

(million)

Number of

B shares

of DKK 0.20

(million)

Holding at the

beginning of the year 18,613 2.0% 48.1 55.8

Cancellation of

treasury shares (19,333) (50.0) (50.0)

Transfer regarding

restricted stock units (148) (0.4) (2.6)

Purchase during

the year 16,855 39.8 44.9

Value adjustment 29 — —

Holding at the end

of the year 16,016 1.6% 37.5 48.1

Treasury shares

Treasury shares are primarily acquired to reduce the company’s share

capital. In addition, a limited part is used to nance Novo Nordisk’s

long-term share-based incentive programme (restricted stock units) and

restricted stock units to employees. Treasury shares are deducted from

the share capital on cancellation at their nominal value of DKK 0.20 per

share. Dierences between this amount and the amount paid to acquire or

received for disposing of treasury shares are deducted directly in equity.

Novo Nordisk’s guiding principle is that any excess capital after the funding

of organic growth opportunities and potential acquisitions should be

returned to investors. Novo Nordisk's dividend payouts are complemented

by share repurchase programmes.

The purchase of treasury shares during the year relates to the remaining

part of the 2019 share repurchase programme, totalling DKK 0.9 billion and

the DKK 17 billion Novo Nordisk B share repurchase programme for 2020, of

which DKK 1 billion was outstanding at year-end. The programme ended on

1 February 2021. Transfer of treasury shares relates to the long-term share-

based incentive programme and restricted stock units to employees.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 66

Skemaer:

Gør rows mindre

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4.2 Financial risks

Management has assessed the following key nancial risks:

Type Financial risk

Foreign exchange risk High

Credit risk Low

Interest rate risk Low

Liquidity risk Low

Novo Nordisk has centralised management of the Group's nancial risks. The

overall objectives and policies for the company's nancial risk management

are outlined in an internal Treasury Policy, which is approved by the Board

of Directors. The Treasury Policy consists of the Foreign Exchange Policy, the

Investment Policy, the Financing Policy and the Policy regarding Credit Risk on

Financial Counterparts, and includes a description of permitted use of nancial

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

nancial positions, and all positions are marked-to-market.

Foreign exchange risk

Foreign exchange risk is the most important nancial risk for Novo Nordisk

and can have a signicant impact on the income statement, statement of

comprehensive income, balance sheet and cash ow statement.

The overall objective of foreign exchange risk management is to reduce the

short-term negative impact of exchange rate uctuations on earnings and

cash ow, thereby contributing to the predictability of the nancial results.

The majority of Novo Nordisk's sales are in USD, EUR, CNY, JPY, CAD and

GBP. The foreign exchange risk is most signicant in USD, CNY and JPY, while

the EUR exchange rate risk is regarded as low because of Denmark's xed

exchange rate policy towards EUR.

Novo Nordisk hedges existing assets and liabilities in key currencies as well as

future expected cash ows up to a maximum of 24 months forward. Hedge

accounting is applied to match the impact of the hedged item and the hedging

instrument in the consolidated income statement. Management has chosen to

classify the result of hedging activities as part of nancial items.

During 2020, the hedging horizon varied between 5 and 13 months for

USD, CNY, JPY, CAD and GBP. The currency hedging strategy balances risk

reduction and cost of hedging by use of foreign exchange forwards and

foreign exchange options matching the due dates of the hedged items.

Expected cash ows are continually assessed using historical inows,

budgets and monthly sales forecasts. Hedge eectiveness is assessed on

a regular basis. There is no expected ineectiveness at 31 December 2020,

primarily because hedging instruments match currencies of hedged cash

ows.

The nancial contracts existing at year-end cover the expected future cash

ow for the following number of months:

2020 2019

USD 10 months 9 months

CNY

6 months 7 months

JPY 12 months 12 months

CAD 9 months 9 months

GBP 11 months 10 months

1. Chinese yuan traded oshore (CNH) is used to hedge Novo Nordisk's CNY currency

exposure.

Key currencies

Exchange rate DKK per 100 2020 2019 2018

USD

Average 654 667 631

Year-end 606 668 652

Year-end change (9.3%) 2.5% 5.1%

CNY

Average 95 97 95

Year-end 93 96 95

Year-end change (3.1%) 1.1% (0.3%)

JPY

Average 6.13 6.12 5.72

Year-end 5.88 6.11 5.91

Year-end change (3.8%) 3.4% 7.3%

CAD

Average 488 503 487

Year-end 474 511 479

Year-end change (7.2%) 6.7% (3.2%)

GBP

Average 839 852 842

Year-end 824 877 827

Year-end change (6.0%) 6.0% (1.4%)

Share capital

Total share

capitalDKK million

A share

capital

B share

capital

Development in share capital:

Share capital 2017 107 393 500

Cancelled in 2018 — (10) (10)

Cancelled in 2019 — (10) (10)

Share capital at the beginning

of the year 107 373 480

Cancelled in 2020 — (10) (10)

Share capital at the end

of the year 107 363 470

At the end of 2020, the share capital amounted to DKK 107 million in A share

capital (equal to 537 million A shares of DKK 0.20) and DKK 363 million in

B share capital (equal to 1,813 million B shares of DKK 0.20). Each A share

carries 200 votes and each B share carries 20 votes.

Specication of Other reserves

DKK million

Exchange

rate ad-

justments

Cash

ow

hedges

Tax and

other

items Total

Reserve at

1 January 2018 (1,556) 2,027 (32) 439

Other comprehensive

income, net for 2018 491 (3,704) 728 (2,485)

Reserve at

31 December 2018 (1,065) (1,677) 696 (2,046)

Other comprehensive

income, net for 2019 226 1,348 (222) 1,352

Reserve at

31 December 2019 (839) (329) 474 (694)

Other comprehensive

income, net for 2020 (1,689) 1,713 (567) (543)

Transfer of cash ow

hedge reserve to

intangible assets

418 (92) 326

Reserve at

31 December 2020 (2,528) 1,802 (185) (911)

1. For information on derivatives refer to note 4.3

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 67

Manuel

skema

Credit exposure

0 under

næste row

o over

Knib andetsidste afsnit

Foreign exchange sensitivity analysis

At year-end, an immediate 5% increase/decrease in the following currencies

versus EUR and DKK would impact Novo Nordisk’s operating prot estimated

by Management as outlined in the table below:

Estimated for

DKK million 2021 2020

USD 1,900 1,950

CNY 460 450

JPY 200 150

CAD 140 130

GBP 110 100

At year-end, an immediate 5% increase/decrease in all other currencies

versus EUR and DKK would aect other comprehensive income and the

income statement as outlined in the table below:

DKK million

Immediate

5% increase

Immediate

5% decrease

2020

Other comprehensive income (1,893) 1,893

Income statement 299 (299)

Total (1,594) 1,594

2019

Other comprehensive income (1,811) 1,811

Income statement 199 (199)

Total (1,612) 1,612

A 5% depreciation of USD versus EUR and DKK at 31 December 2020 would

aect other comprehensive income by DKK 1,380 million (DKK 1,298 million in

2019) and the income statement by DKK -2 million (DKK 135 million in 2019).

The foreign exchange sensitivity analysis comprises eects from the Group's

cash, trade receivables and trade payables, current loans, current and non-

current nancial investments, lease liabilities, foreign exchange forwards and

foreign exchange options at year-end. Anticipated currency transactions,

investments and non-current assets are not included.

Credit risk

Credit risk arises from the possibility that transactional counterparties may

default on their obligations, causing nancial losses for the Group. Novo

Nordisk considers its maximum credit exposure to nancial counterparties

to be DKK 15,089 million (DKK 15,663 million in 2019). In addition, Novo

Nordisk considers its maximum credit exposure to trade receivables, other

receivables (less prepayments and VAT receivables) and other nancial

assets to be DKK 29,522 million (DKK 26,622 million in 2019). Please refer to

note 4.8 for details of the Group's total nancial assets.

To manage credit risk regarding nancial counterparties, Novo Nordisk only

enters into derivative nancial contracts and money market deposits with

nancial counterparties possessing a satisfactory long-term credit rating

from at least two out of the three selected ratings agencies: Standard and

Poor's, Moody's and Fitch. Furthermore, maximum credit lines dened for

each counterparty diversify the overall counterparty risk. The table below

shows Novo Nordisk's credit exposure on cash and nancial derivatives.

Credit exposure for cash at bank and derivative nancial instruments

(market value)

DKK million

Cash at

bank

Derivative

nancial

instruments Total

2020

AA range 7,296 989 8,285

A range 4,443 1,343 5,786

BBB range 212 — 212

Not rated or below BBB range 806 — 806

Total 12,757 2,332 15,089

2019

AA range 7,471 139 7,610

A range 7,145 49 7,194

BBB range 314 — 314

Not rated or below BBB range 545 — 545

Total 15,475 188 15,663

Outside the US, Novo Nordisk has no signicant concentration of credit

risk related to trade receivables or other receivables and prepayments, as

the exposure in general is spread over a large number of counterparties

and customers. In the US, the three major wholesalers account for a large

proportion of total net sales, see note 2.1. However, US wholesaler credit

ratings are monitored and part of the trade receivables are sold on full non-

recourse terms; see below for details. Novo Nordisk continues to monitor

the credit exposure in countries with increasing sales and low credit ratings.

Trade receivable programmes

Please refer to note 3.4 for the description of COVID-19’s impact on trade

receivables including the loss allowance for the Group and ageing analysis.

Novo Nordisk's subsidiaries in the US and Japan employ trade receivable

programmes in which trade receivables are sold on full non-recourse terms

to optimise working capital.

At year-end, the Group had derecognised receivables without recourse

having due dates after 31 December 2020 amounting to:

DKK million 2020 2019 2018

US 1,817 3,672 3,587

Japan 2,351 2,149 1,937

In addition, full non-recourse o-balance-sheet factoring arrangement

programmes are occasionally applied by Novo Nordisk subsidiaries around

the world, with limited impact on the Group's trade receivables.

Please refer to note 3.4 for the split of allowance for trade receivables by

geographical segment.

Interest rate risk

Novo Nordisk has no signicant exposure to interest rate risk as Novo

Nordisk does not hold any signicant interest-bearing marketable securities

or non-current loans. Furthermore, net interest costs have low sensitivity

towards interest rates due to the capital structure.

Liquidity risk

The liquidity risk is considered to be low. Novo Nordisk ensures the

availability of the required liquidity through a combination of cash

management, highly liquid investment portfolios and both uncommitted and

committed credit facilities. Novo Nordisk uses cash pools for optimisation

and centralisation of cash management.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 68

4.3 Derivative nancial instruments

Derivative nancial instruments 2020 2019

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

Forward contracts USD

29,110 1,658 — 25,394 81 315

Forward contracts CNH, JPY, GBP and CAD 10,291 191 47 10,013 35 130

Forward contracts, cash ow hedges 39,401 1,849 47 35,407 116 445

Forward contracts USD 19,411 379 1,307 11,287 61 217

Forward contracts CNH, CAD, EUR, GBP and JPY 4,578 104 11 3,761 11 72

Forward contracts, fair value hedges 23,989 483 1,318 15,048 72 289

Total derivative nancial instruments 63,390 2,332 1,365 50,455 188 734

Recognised in the income statement 483 1,318 72 289

Recognised in other comprehensive income

1,849 47 116 445

1. Average hedge rate for USD cash ow hedges is 640 at the end of 2020 and 654 at the end of 2019.

2. The fair value of cash ow hedges at year-end 2020, DKK 1,802 million, is recognised in other comprehensive income. In addition DKK 418 million in cash ow hedge losses on

intangible asset purchases has been incurred for a total 2020 other comprehensive impact of DKK 1,384 million. The DKK 418 million deferred loss was transferred directly from the

cash ow hedge reserve to the initial cost of the intangible assets.

The nancial contracts are expected to impact the income statement within

the next 12 months, with deferred gains and losses on cash ow hedges

then being transferred to nancial income or nancial expenses.

Accounting policies

Novo Nordisk uses nancial instruments to reduce the impact of foreign

exchange on nancial results.

Use of derivative nancial instruments

The derivative nancial instruments are used to manage the exposure to

market risk. None of the derivatives are held for trading.

Novo Nordisk uses forward exchange contracts and, to a lesser extent,

currency options to hedge forecast transactions, assets and liabilities. The

overall policy is to hedge the majority of total currency exposure.

Net investments in foreign subsidiaries are currently not hedged.

Initial recognition and measurement

On initiation of the contract, Novo Nordisk designates each derivative

nancial contract that qualies for hedge accounting as one of:

– hedges of the fair value of a recognised asset or liability (fair value hedge)

– hedges of the fair value of a forecast nancial transaction (cash ow hedge).

All contracts are initially recognised at fair value and subsequently

remeasured at fair value at the end of the reporting period.

Fair value hedges

Value adjustments of fair value hedges are recognised in the income

statement along with any value adjustments of the hedged asset or liability

that are attributable to the hedged risk.

Cash ow hedges

Value adjustments of the eective part of cash ow hedges are recognised

directly in other comprehensive income. The cumulative value adjustment

of these contracts is transferred from other comprehensive income to the

income statement when the hedged transaction is recognised in the income

statement.

For cash ow hedges of foreign currency risk on highly probable non-

nancial asset purchases, the cumulative value adjustments are transferred

directly from the cash ow hedge reserve to the initial cost of the asset

when recognised.

Discontinuance of cash ow hedging

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 nancial income or nancial expenses.

Fair value determination

The fair value of derivative nancial instruments is measured on the basis

of quoted market prices of nancial instruments traded in active markets.

If an active market exists, the fair value is based on the most recently

observed market price at the end of the reporting period.

If a nancial instrument is quoted in a market that is not active, Novo

Nordisk bases its valuation on the most recent transaction price.

Adjustment is made for subsequent changes in market conditions, for

instance by including transactions in similar nancial instruments assumed

to be motivated by normal business considerations.

If an active market does not exist, the fair value of standard and simple

nancial instruments, such as foreign exchange forward contracts, interest

rate swaps, currency swaps and unlisted bonds, is measured according to

generally accepted valuation techniques. Market-based parameters are

used to measure the fair value.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 69

4.5 Cash and cash equivalents, nancial reserves and

free cash ow

DKK million 2020 2019 2018

Cash and cash equivalents

Cash at bank (note 4.2) 12,757 15,475 15,638

Borrowings

(531) (64) (9)

Cash and cash equivalents 12,226 15,411 15,629

Financial reserves

Cash and cash equivalents 12,226 15,411 15,629

Undrawn committed credit facility

11,531 11,578 11,574

Undrawn bridge facility

5,577 — —

Borrowings

1, 3

(576) (595) (506)

Financial reserves

28,758 26,394 26,697

Free cash ow

DKK million 2020 2019 2018

Net cash generated from

operating activities 51,951 46,782 44,616

Net cash used in investing

activities (22,436) (11,509) (12,080)

Repayment on lease liabilities (950) (822) —

Free cash ow

28,565 34,451 32,536

1. Bank overdrafts includes DKK 576 million classied as nancing activities (DKK 595

million in 2019) and DKK 531 million classied as cash and cash equivalents (DKK 64

million in 2019).

2. The undrawn committed credit facility comprises a EUR 1,550 million facility (EUR

1,550 million in 2019 and EUR 1,550 million in 2018) committed by a portfolio of

international banks. The facility matures in 2024.

3. The undrawn bridge facility included in nancial reserves comprises the EUR

750 million (DKK 5,577 million) undrawn portion of EUR 1,500 million bridge facility.

The facility is expected to mature in 2021 but the terms provide that the maturity can

be extended, at the option of Novo Nordisk, through June 2022. Financial reserves

include amounts undrawn under credit facilities and overdrafts where the repayment

is not contractually required within 12 months. In accordance with IFRS, the DKK

5,577 million (EUR 750 million) drawn loan has been classied as current borrowings as

it is Management’s expectation that it will be repaid in 2021.

4. Additional non-IFRS nancial measure; please refer to ‘Non-IFRS nancial measures’,

which is not part of the audited nancial statements.

4.4 Borrowings

Contractual undiscounted cashows 2020 2019

DKK million Leases Loans

Bank

overdrafts

Total Leases

Bank

overdrafts

Total

Within 1 year 855 5,577 1,107 7,539 847 659 1,506

1-3 years 1,247 — — 1,247 1,424 — 1,424

3-5 years 694 — — 694 734 — 734

More than 5 years 1,241 — — 1,241 1,140 — 1,140

Total contractual undiscounted cash ows

at the end of the year 4,037 5,577 1,107 10,721 4,145 659 4,804

Contractual discounted cash ows included

in the balance sheet at the end of the year 3,672 5,577 1,107 10,356 3,824 659 4,483

Non-current liabilities 2,897 — — 2,897 3,009 — 3,009

Current liabilities 775 5,577 1,107 7,459 815 659 1,474

Reconciliation of liabilities arising from nancing activities Non-cash movements

DKK million

Beginning

of the year Cash ows Additions Disposals

Exchange

rates Other

End of the

year

2020

Lease liabilities 3,824 (950) 978 — (171) (9) 3,672

Loans — 5,582 — — (5) — 5,577

Bank overdrafts

595 100 — — (119) — 576

Liabilities arising from nancing activities 4,419 4,732 978 — (295) (9) 9,825

Bank overdrafts

64 467 — — — — 531

Total borrowings 4,483 5,199 978 — (295) (9) 10,356

2019

Lease liabilities 3,988 (822) 640 (57) 63 12 3,824

Bank overdrafts

506 81 — — 8 — 595

Liabilities arising from nancing activities 4,494 (741) 640 (57) 71 12 4,419

Bank overdrafts

9 55 — — — — 64

Total borrowings 4,503 (686) 640 (57) 71 12 4,483

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 70

4.6 Change in working capital

DKK million 2020 2019 2018

Inventories (895) (1,305) (963)

Trade receivables (2,822) (2,126) (2,621)

Other receivables and

prepayments (419) (1,190) (662)

Trade payables (641) (398) 1,146

Other liabilities 1,274 1,202 (348)

Adjustment for payables related to

non-current assets 879 295 84

Adjustment related to divestment

of Group companies — (42) —

Change in working capital

including exchange rate

adjustments (2,624) (3,564) (3,364)

Exchange rate adjustments (1,729) 176 (6)

Cash ow change in working

capital (4,353) (3,388) (3,370)

Accounting policies

Working capital is dened as current assets less current liabilities and

measures the liquid assets Novo Nordisk has available for the business.

4.7 Other non-cash items

For the purpose of presenting the cash ow statement, non-cash items

with eect on the income statement must be reversed to identify the

actual cash ow eect from the income statement. The adjustments are

specied as follows:

DKK million 2020 2019 2018

Reversals of non-cash income

statement items

Interest income and interest

expenses, net (note 4.9) 53 155 34

Capital gain/(loss) on investments,

net etc (note 4.9) 195 145 (163)

Result of associated company

(note 4.9) (149) 137 (12)

Share-based payment costs

(note 5.1) 823 363 414

Income from the divestment of

Group companies — (68) (122)

Adjustment in non-cash items

related to divestment of group

companies — 162 —

Increase/(decrease) in provisions

(note 3.6) and retirement benet

obligations (note 3.5) 3,605 6,071 5,503

Other 3,322 67 444

Total other non-cash items 7,849 7,032 6,098

Restricted cash

Cash and cash equivalents at 31 December 2020 includes DKK 653 million

that is restricted (DKK 509 million in 2019). The restricted cash balance

relates to subsidiaries in which availability of currency for remittance of

funds is temporarily scarce.

Accounting policies

The cash ow statement is presented in accordance with the indirect

method commencing with net prot for the year. Cash ows in foreign

currencies are translated to DKK at the average exchange rate for the

respective year.

Cash from operating activities converts income statement items from

the accrual basis of accounting to cash basis. As such, starting with net

prot, non-cash items are reversed and actual payments included. The

change in working capital is also taken into account, as this shows the

development in money tied up in the balance sheet. Cash from investing

activities shows payments related to the purchase and sale of Novo Nordisk’s

long-term investments. This includes xed assets such as construction of

new production sites, intangible assets such as patents and licences, and

nancial assets.

Cash and cash equivalents consists of cash oset by short-term bank

overdrafts. Where short-term bank overdrafts are consistently overdrawn,

they are excluded from cash and cash equivalents. The movement in such

facilities is presented under nancing activities in the cash ow statement.

Financial reserves comprise the sum of cash and cash equivalents at the end

of the year and undrawn committed credit and loan facilities, with a maturity

of more than 12 months, less loans and bank overdrafts classied as

liabilities arising from nancing activities contractually obliged for repayment

within 12 months of the balance sheet date.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 71

4.8 Financial assets and liabilities

Financial assets by category

DKK million 2020 2019

Other nancial assets

766 970

Derivative nancial instruments (note 4.3) 2,332 188

Financial assets at fair value through the

income statement 3,098 1,158

Other nancial assets

300 364

Trade receivables 11,643 12,203

Other receivables and prepayments (current

and non-current) 4,835 4,275

– less prepayments and VAT receivables (4,113) (3,899)

Cash at bank (note 4.5) 12,757 15,475

Financial assets at amortised cost 25,422 28,418

Trade receivables in a factoring portfolio

16,091 12,709

Financial assets at fair value through OCI 16,091 12,709

Total nancial assets at the end of the year

by category

44,611 42,285

1. Financial assets with the exception of other nancial assets and the non-current part of

other receivables and prepayments (DKK 674 million in 2020, DKK 841 million in 2019)

are all due within one year. Other nancial assets at amortised cost include DKK 280

million which are due in more than ve years (DKK 327 million in 2019). Other nancial

assets measured at fair value through the income statement are minor shareholdings.

2. Trade receivables which are measured at fair value through OCI, which have no

associated loss allowance. Refer to note 3.4.

Financial liabilities by category

DKK million 2020 2019

Derivative nancial instruments (note 4.3) 1,365 734

Financial liabilities measured at

fair value through the income statement 1,365 734

Borrowings (non-current) 2,897 3,009

Borrowings (current)

7,459 1,474

Trade payables 5,717 6,358

Other liabilities 17,005 15,085

– less VAT and duties payable (598) (478)

Financial liabilities measured at

amortised cost 32,480 25,448

Total nancial liabilities at the end of the year

by category

33,845 26,182

3. The fair value of loans approximates the booked amount

4. Please refer to note 4.4 for a maturity analysis for non-current and current borrowings.

All other nancial liabilities are due within one year.

Fair value measurement hierarchy

DKK million 2020 2019

Active market data 634 846

Directly or indirectly observable market data 2,332 188

Not based on observable market data

16,223 12,833

Total nancial assets at fair value 19,189 13,867

Active market data — —

Directly or indirectly observable market data 1,365 734

Not based on observable market data — —

Total nancial liabilities at fair value 1,365 734

5. The fair value of trade receivables in a factoring portfolio is calculated based on the net

invoice amount (invoice amount less charge-backs) less the fee payable to the factoring

entity. The factoring fee is insignicant due to the short period between the time of

sale to the factoring entity and the invoice due date and the rate applicable. Inputs into

the estimate of US wholesaler charge-backs are described in note 2.1.

Financial assets and liabilities measured at fair value can be categorised

using the fair value measurement hierarchy above. There were no transfers

between the ’Active market data’ and ’Directly or indirectly observable

market data’ categories during 2020, 2019 or 2018. There are no signicant

intangible assets or items of property, plant and equipment measured at fair

value.

For a description of the credit quality of nancial assets such as trade

receivables, cash at bank, current debt and derivative nancial instruments,

refer to notes 4.2 and 4.3.

Accounting policies

Depending on purpose, Novo Nordisk classies investments into the

following categories:

– Financial assets at fair value through the income statement

– Financial assets at amortised cost

– Financial assets at fair value through OCI

Management determines the classication of its nancial assets on initial

recognition and re-evaluates this at the end of every reporting period to the

extent that such a classication is permitted or required.

Recognition and measurement

Purchases and sales of nancial assets are recognised on the settlement

date. These are initially recognised at fair value.

Fair value disclosures are made separately for each class of nancial

instruments at the end of the reporting period.

Financial assets are removed from the balance sheet when the rights to

receive cash ows have expired or have been transferred, and Novo Nordisk

has transferred substantially all the risks and rewards of ownership.

Financial assets 'at fair value through the income statement'

Financial assets at fair value through the income statement consist of

equity investments and forward exchange contracts. Equity investments are

included in other nancial assets unless management intends to dispose of

the investment within 12 months of the end of the reporting period. In that

case, the current part is included in other receivables and prepayments.

Net gains and losses arising from changes in the fair value of nancial assets

are recognised in the income statement as nancial income or expenses.

The fair values of quoted investments are based on current bid prices at

the end of the reporting period. Financial assets for which no active market

exists are carried at fair value based on a valuation methodology.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 72

Financial assets 'at amortised cost'

Financial assets at amortised cost are cash at bank and non-derivative

nancial assets solely with payments of principal and interest. Novo Nordisk

normally 'holds-to-collect' the nancial assets to attain the contractual cash

ows. If collection is expected within one year (or in the normal operating

cycle of the business if longer), they are classied as current assets. If not,

they are presented as non-current assets.

Trade receivables are initially recognised at transaction price and other

receivables are recognised initially at fair value. Subsequently they are

measured at amortised cost using the eective interest method, less

allowance for doubtful receivables.

Financial assets 'at fair value through other comprehensive income'

Financial assets at fair value through other comprehensive income are trade

receivables that are held to collect or to sell in factoring agreements.

Financial liabilities 'at fair value through the income statement'

Financial liabilities at fair value through the income statement consist of

forward exchange contracts.

Financial liabilities 'at amortised cost'

Financial liabilities at amortised cost consist of bank overdrafts, trade

payables and other liabilities.

4.9 Financial income and expenses

Financial income

DKK million 2020 2019 2018

Interest income

337 65 51

Foreign exchange gain (net) 1,142 — —

Financial gain from forward

contracts (net) — — 1,656

Financial gain from currency

options (net) — — 152

Capital gain on investments, etc. — — 251

Result of associated companies 149 — 12

Total nancial income 1,628 65 2,122

Financial expenses

DKK million 2020 2019 2018

Interest expenses

390 220 85

Foreign exchange loss (net) — 539 1,510

Financial loss from forward

contracts (net) 1,889 2,673 —

Capital loss on investments, etc. 195 145 88

Result of associated companies — 137 —

Other nancial expenses 150 281 72

Total nancial expenses 2,624 3,995 1,755

1. Total interest income and expenses is measured at amortised cost for nancial assets

and liabilities.

Financial impact from forward contracts and currency options, specied

DKK million 2020 2019 2018

Forward contracts

Income/(loss) transferred from

other comprehensive income (329) (1,677) 1,841

Value adjustment of transferred

contracts 79 (1,609) (1,299)

Unrealised fair value adjustments

of forward contracts (835) (217) (143)

Realised foreign exchange gain/

(loss) on forward contracts (804) 830 1,257

Financial income/(expense) from

forward contracts (1,889) (2,673) 1,656

Currency options

Realised income/(loss) transferred

from other comprehensive income — — 186

Value adjustment of transferred

options — — (3)

Foreign exchange gain/(loss) on

currency options — — (31)

Financial income/(expense) from

currency options — — 152

Accounting policies

As described in note 4.2 Management has chosen to classify the result

of hedging activities as part of nancial items in the income statement

except for cash ow hedges of foreign currency risk on highly probable

non-nancial asset purchases, where the cumulative value adjustments are

transferred directly from the cash ow hedge reserve to the initial cost of the

asset when recognised.

Financial items primarily relate to foreign exchange elements and are

mainly impacted by the cumulative value adjustment of cash ow hedges

transferred from other comprehensive income to the income statement

when the hedged transaction is recognised in the income statement.

In addition, value adjustments of fair value hedges are recognised in

nancial income and nancial expenses along with any value adjustments of

the hedged asset or liability that are attributable to the hedged risk. Finally,

value adjustments of foreign currency assets and liabilities in non-hedged

currencies will impact nancial income and nancial expenses.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 73

Tjek Typo i W-desk

1. linje i skema

luft over note

minus en linje under note

Section 5

Other disclosures

5.1 Share-based payment schemes

Share-based payment expensed in the income statement

DKK million 2020 2019 2018

Restricted stock units to employees 189 48 204

Long-term share-based incentive

programme (Management Board)

162 86 48

Long-term share-based incentive

programme (management group

below Management Board) 436 195 145

Shares allocated to individual

employees 36 34 17

Share-based payment expensed in

the income statement 823 363 414

1. In 2017 Novo Nordisk introduced, for the rst time, a share-based compensation

programme with terms which amortises the grant date valuation over four years. The

2020 expense includes amortisation of the 2017, 2018, 2019 and 2020 programmes.

Restricted stock units to employees

In appreciation of the eorts of employees during recent years, as of 1

August 2019, all employees in the company were oered 75 restricted

stock units. A restricted stock unit gives the holder the right to receive one

Novo Nordisk B share free of charge in February 2023 subject to continued

employment. The cost of the DKK 660 million programme is amortised over

the vesting period.

Long-term share-based incentive programme

Management Board

On 2 February 2021, the Board of Directors approved the allocation of a

total of 370,038 Novo Nordisk B shares to the members of the Management

Board for the 2020 nancial year. The value at launch of the programme

(adjusted for expected dividends) was DKK 152 million. On average, this

corresponds to 14.9 months’ xed base salary plus pension contribution

for the CEO, 11.2 months’ xed base salary plus pension contribution

per executive vice president as of 1 March 2020 and 8.3 months’ xed

base salary plus pension for senior vice presidents. The cost of the 2020

programme is amortised over the vesting period of 2020-2023 at an annual

amount of DKK 38 million. The amount of shares allocated may be reduced

or increased by up to 30%, depending on whether the average sales growth

per year in the three-year vesting period deviates from a target set by the

Board of Directors.

The grant date of the programme was February 2020, and the share

price used for the determining the grant date fair value of the award was

the average share price (DKK 435) for Novo Nordisk B shares on Nasdaq

Copenhagen in the period 5-19 February 2020, adjusted for the expected

dividend. Based on the split of participants when the share allocation was

decided, 47% of the allocated shares will be allocated to members of Executive

Management and 53% to other members of the Management Board.

The shares allocated to the pool for 2017 were released to the individual

participants subsequent to approval of the 2020 Annual Report by the

Board of Directors and after the announcement of the 2020 full-year

nancial results on 3 February 2021. The shares allocated correspond

to a value at launch of the programme of DKK 76 million, expensed over

the vesting period of 2017-2020. The number of shares to be transferred

(331,587 shares) is lower than the original number of shares allocated, as

some participants had left the company before the programme's release

conditions were met.

All restricted stock units and shares allocated to Management are hedged by

treasury shares.

Management group below Management Board

The management group below the Management Board has a share-based

incentive programme with similar performance criteria. For 2020, a total

of 1,011,692 shares were allocated to this group, corresponding to a value

at launch of the programme (adjusted for expected dividends) of DKK 416

million. The cost of the 2020 programme is amortised over the vesting

period of 2020-2023 at an annual amount of DKK 104 million. The amount of

shares allocated may be reduced or increased by up to 30%, depending on

whether the average sales growth per year in the three-year vesting period

deviates from a target set by the Board of Directors.

The shares allocated for 2017 were released to the individual participants

subsequent to approval of the 2020 Annual Report by the Board of Directors

and after the announcement of the 2020 full-year nancial results on 3

February 2021. The shares allocated correspond to a value at launch of

the programme of DKK 162 million amortised over the period 2017-2020.

The number of shares to be transferred (635,516 shares) is lower than

the original number of shares allocated, as some participants had left the

company before the programme’s release conditions were met.

Accounting policies

Share-based compensation

Novo Nordisk operates equity-settled, share-based compensation plans.

The fair value of the employee services received in exchange for the grant of

shares is recognised as an expense and allocated over the vesting period.

The total amount to be expensed over the vesting period is determined by

reference to the fair value of the shares granted, excluding the impact of

any non-market vesting conditions. The fair value is xed at the grant date,

and adjusted for expected dividends during the vesting period. Non-market

vesting conditions are included in assumptions about the number of shares

that are expected to vest. At the end of each reporting period, Novo Nordisk

revises its estimates of the number of shares expected to vest. Novo Nordisk

recognises the impact of the revision of the original estimates, if any, in the

income statement and in a corresponding adjustment to equity (change in

proceeds) over the remaining vesting period. Adjustments relating to prior

years are included in the income statement in the year of adjustment.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 74

General terms and conditions of launched programmes

Restricted stock units to employees Shares for Management Board

Shares for management group below

Management Board

Shares allocated to individual

employees

2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018

Number of shares awarded in the year — 2,148,580 — 370,038 508,398 411,090 1,011,692 1,300,333 1,114,455 43,790 154,122 159,437

Value per share at launch (DKK) — 307 — 411 298 280 411 298 280 391 311 278

Total market value at launch (DKK million) — 660 — 152 152 115 416 387 312 17 48 44

Amortisation period of the programme 2019 to

2023

2020 to

2023

2019 to

2022

2018 to

2021

2020 to

2023

2019 to

2022

2018 to

2021

2020 to

2023

2019 to

2022

2018 to

2021

Allocated to recipients Feb 2023 Feb 2024 Feb 2023 Feb 2022 Feb 2024 Feb 2023 Feb 2022 2023 2022 2021

Vesting period — 3.5 years — 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years

Outstanding restricted stock units

Total Restricted stock units to employees Shares for Management Board

Shares for management group below

Management Board

Shares allocated to individual

employees

2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018 2020 2019 2018

Outstanding at the beginning of the

year 6,879,198 5,584,019 4,933,882 2,148,580 1,521,031 1,556,211 1,326,080 1,228,714 1,115,494 3,173,185 2,665,226 2,226,683 231,353 169,048 35,494

Released allocated shares (361,844) (2,553,658) (825,537) (29,250) (1,431,192) (35,180) (95,082) (378,421) (284,173) (171,162) (662,172) (480,301) (66,350) (81,873) (25,883)

Cancelled allocated shares (129,713) (262,596) (209,308) — (89,839) — (12,700) (32,611) (13,697) (95,038) (130,202) (195,611) (21,975) (9,944) —

Allocated in the year 1,425,520 4,111,433 1,684,982 — 2,148,580 — 370,038 508,398 411,090 1,011,692 1,300,333 1,114,455 43,790 154,122 159,437

Performance adjustment

863,557 — — — — — 239,567 — — 623,990 — — — — —

Outstanding at the end of the year 8,676,718 6,879,198 5,584,019 2,119,330 2,148,580 1,521,031 1,827,903 1,326,080 1,228,714 4,542,667 3,173,185 2,665,226 186,818 231,353 169,048

1. Number of shares for Management Board and management group below Management board has been adjusted as the sales growth target set by the Board is expected to be exceeded for the 2018, 2019 and 2020 programmes.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 75

5.2 Commitments

Total contractual obligations and recognised non-current debt can be specied as follows (payments due by period):

2020 2019

DKK million

Within

1 year

1-3

years

3-5

years

than

5 years Total

Within

1 year

1-3

years

3-5

years

than

5 years Total

Retirement benet obligations 23 46 44 1,286 1,399 13 26 25 1,270 1,334

Leases (note 4.4) 855 1,247 694 1,241 4,037 847 1,424 734 1,140 4,145

Total obligations recognised in the

balance sheet 878 1,293 738 2,527 5,436 860 1,450 759 2,410 5,479

Leases

152 198 134 280 764 128 229 199 376 932

Research and development obligations 2,733 3,460 905 137 7,235 2,600 3,258 1,493 29 7,380

Research and development – potential

milestone payments

205 918 507 2,453 4,083 300 1,023 1,009 2,403 4,735

Commercial product launch – potential

milestone payments

— — 212 5,893 6,105 — — — 3,468 3,468

Purchase obligations relating to invest-

ments in property, plant and equipment 339 — — — 339 172 — — — 172

Other purchase obligations 7,528 3,014 773 748 12,063 5,695 2,989 1,175 621 10,480

Total obligations not recognised in the

balance sheet 10,957 7,590 2,531 9,511 30,589 8,895 7,499 3,876 6,897 27,167

Total contractual obligations 11,835 8,883 3,269 12,038 36,025 9,755 8,949 4,635 9,307 32,646

1. Predominantly relates to estimated variable property taxes, leases committed not yet commenced and low value assets.

2. Potential milestone payments are associated with uncertainty as they are linked to successful achievements in research activities.

Contractual obligations

The lease commitments are related to IFRS 16 leases primarily for premises

and company cars and include the present value of future lease payments

during the lease term. Approximately 75% of the commitments are related

to leases outside Denmark.

Research and development obligations include contingent payments related

to achieving development milestones. Such amounts entail uncertainties in

relation to the period in which payments are due because a proportion of

the obligations are dependent on milestone achievements. Exercise fees

and subsequent milestone payments under in-licensing option agreements

are excluded, as Novo Nordisk is not contractually obligated to make such

payments. Commercial product launch milestones include contingent

payments solely related to achievement of a commercial product launch

following regulatory approval. Commercial milestones, royalties and

other payments based on a percentage of sales generated from sale of

goods following marketing approval are excluded from the contractual

commitments analysis because of their contingent nature, related to future

sales. The due periods disclosed are based on Management’s best estimate.

The purchase obligations primarily relate to purchase agreements regarding

medical equipment and consumer goods. Novo Nordisk expects to fund

these commitments with existing cash and cash ow from operations.

Other guarantees

Other guarantees amounts to DKK 1,117 million (DKK 906 million in 2019).

Other guarantees primarily relate to performance guarantees issued by

Novo Nordisk.

World Diabetes Foundation (WDF)

At the Annual General Meeting in 2020, a donation to WDF was approved,

thereby replacing the remaining ve years of the former donation approved

by the Annual General Meeting in 2014, which covered the period 2018-

2024. For the years 2020-2024, the donation is calculated as 0.085% of Novo

Nordisk's total Diabetes care net sales. The annual donation cannot exceed

DKK 91 million in 2020, DKK 92 million in 2021, DKK 93 million in 2022, DKK

94 million in 2023, ending at DKK 95 million in 2024, or 15% of the taxable

income of Novo Nordisk A/S in the nancial year in question, whichever is

the lowest. In addition, in 2020 Novo Nordisk A/S granted a special one-o

contribution of DKK 50 million.

For 2020, the total amount to WDF was DKK 138 million (DKK 86 million in

2019 and DKK 85 million in 2018).

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 76

5.3 Related party transactions

Material transactions with related parties

DKK million 2020 2019 2018

Novo Holdings A/S

Purchase of Novo Nordisk B shares 5,963 4,894 4,207

Sale of NNIT B shares — — (368)

Dividend payment to

Novo Holdings A/S 5,767 5,580 5,496

NNIT Group

Services provided by NNIT 775 941 1,052

Dividend payment from NNIT (18) (20) (19)

Novozymes Group

Services provided by Novo Nordisk (113) (132) (115)

Services provided by Novozymes 72 103 121

CS Solar Fund XIV

Purchase of shares by Novo Nordisk — 97 —

Liability for capital commitment

— 389 —

Distribution by CS Solar Fund XIV — (385) —

1. The liability disclosed for 2019 related to capital commitment was paid in 2020

(DKK 392 million).

Novo Nordisk A/S is controlled by Novo Holdings A/S (incorporated in

Denmark), which owns 28.1% of the share capital in Novo Nordisk A/S,

representing 76.5% of the total number of votes. 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.

As associated companies of Novo Nordisk A/S, NNIT Group and Churchill

Stateside Solar Fund XIV, LLC ('CS Solar Fund XIV') are considered related

parties. As an associated company of Novo Holdings A/S, Unchained Labs,

Inc. is considered a related party to Novo Nordisk A/S. As they share a

controlling shareholder, the Novozymes Group, Sonion Group and Xellia

Pharmaceuticals are also considered to be related parties as well as the

Board of Directors or Executive Management of Novo Nordisk A/S.

In 2020, Novo Nordisk A/S acquired 14,025,000 B shares, worth DKK

6.0 billion, from Novo Holdings A/S as part of the DKK 17.0 billion share

repurchase programme. The transaction price for each transaction was

calculated as the average market price in the open windows following the

announcements of the nancial results for the four quarters in 2020.

In Novo Nordisk A/S, there were no transactions with the Board of Directors

or Executive Management besides remuneration. There were no other

transactions with the Board of Directors or Executive Management of NNIT

A/S, Novozymes A/S, Novo Holdings A/S, the Novo Nordisk Foundation, Xellia

Pharmaceuticals ApS, Unchained Labs, Sonion A/S or CS Solar Fund XIV.

For information on remuneration of the Management of Novo Nordisk,

please refer to note 2.4, ‘Employee costs’. There were no loans to the Board

of Directors or Executive Management in 2020, nor were there any in 2019

or 2018.

There were no material unsettled balances with related parties at the end of

the year.

5.5 General accounting policies

Principles of consolidation

The consolidated nancial statements incorporate the nancial statements

of the parent company Novo Nordisk A/S and entities controlled by Novo

Nordisk A/S. Control exists when Novo Nordisk has eective power over the

entity and has the right to variable returns from the entity.

Where necessary, adjustments are made to bring the nancial statements

of subsidiaries in line with the Novo Nordisk Group's accounting policies. All

intra-Group transactions, balances, income and expenses are eliminated in

full when consolidated.

The results of subsidiaries acquired or disposed of during the year are

included in the consolidated income statement from the eective date of

acquisition and up to the eective date of disposal.

Translation of foreign currencies

Functional and presentation currency

Items included in the nancial statements of Novo Nordisk's entities are

measured using the currency of the primary economic environment in

which the entity operates (functional currency). The consolidated nancial

statements are presented in Danish kroner (DKK), which is also the

functional and presentation currency of the parent company.

Translation of transactions and balances

Foreign currency transactions are translated into the functional currency

using the exchange rates prevailing at the transaction dates. Foreign

exchange gains and losses resulting from the settlement of such

transactions and from the translation at year-end exchange rates of

monetary assets and liabilities are recognised in the income statement.

Foreign currency dierences arising from the translation of eective

qualifying cash ow hedges are recognised in other comprehensive income.

Translation of Group companies

Financial statements of foreign subsidiaries are translated into DKK at the

exchange rates prevailing at the end of the reporting period for balance

sheet items, and at average exchange rates for income statement items.

All eects of exchange rate adjustments are recognised in other

comprehensive income, i.e.:

– The translation of foreign subsidiaries’ net assets at the beginning of the

year to the exchange rates at the end of the reporting period.

– The translation of foreign subsidiaries’ statements of comprehensive

income at average to year-end exchange rates.

5.4 Fee to statutory auditors

DKK million 2020 2019 2018

Statutory audit 26 26 25

Audit-related services 3 4 3

Tax advisory services 9 11 11

Other services 4 4 3

Total fee to statutory auditors 42 45 42

Fees for services other than statutory audit of the nancial statements

amount to DKK 16 million (DKK 19 million in 2019 and DKK 17 million in

2018). PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab

(PricewaterhouseCoopers Denmark) provided other services in the amount

of DKK 9 million (DKK 12 million in 2019 and DKK 9 million in 2018), which

relate to tax compliance and transfer pricing, educational training, review of

ESG data, due diligence and other assurance assessments and opinions.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information Novo Nordisk Annual Report 2020 / 77

Manuel

Company and country Percentage of shares owned Activity Company and country Percentage of shares owned Activity

5.6 Companies in the Novo Nordisk Group

Activity:

•

Sales and marketing

•

Production

•

Research and development

•

Services/investments

Company and country Percentage of shares owned Activity

Parent company

Novo Nordisk A/S, Denmark

• • • •

Subsidiaries by geographical area

North America Operations

Novo Nordisk Canada Inc., Canada 100

•

Novo Nordisk Inc., United States 100

•

Novo Nordisk North America Operations A/S, Denmark 100

•

Novo Nordisk Pharmaceutical Industries LP, United States 100

•

Novo Nordisk Pharma, Inc., United States 100

•

Novo Nordisk Research Center Indianapolis, Inc., United States 100

•

Novo Nordisk Research Center Seattle, Inc., United States 100

•

Novo Nordisk US Bio Production, Inc., United States 100

•

Novo Nordisk US Commercial Holdings, Inc., United States 100

•

Novo Nordisk US Holdings Inc., United States 100

•

Corvidia Therapeutics, Inc., United States 100

•

Emisphere Technologies, Inc., United States 100

•

International Operations

Novo Nordisk Pharmaceuticals A/S, Denmark 100

•

Novo Nordisk Pharma Operations A/S, Denmark 100

• •

Novo Nordisk Region AAMEO and LATAM A/S, Denmark 100

•

Novo Nordisk Region Europe A/S, Denmark 100

•

Novo Nordisk Region Japan & Korea A/S, Denmark 100

•

EMEA

Aldaph SpA, Algeria 100

• •

Novo Nordisk Pharma GmbH, Austria 100

•

S.A. Novo Nordisk Pharma N.V., Belgium 100

•

Novo Nordisk Pharma d.o.o., Bosnia and Herzegovina 100

•

Novo Nordisk Pharma EAD, Bulgaria 100

•

Novo Nordisk Hrvatska d.o.o., Croatia 100

•

Novo Nordisk s.r.o., Czech Republic 100

•

Novo Nordisk Denmark A/S, Denmark 100

•

Novo Nordisk Pharmatech A/S, Denmark 100

• •

Novo Nordisk Egypt LLC, Egypt 100

•

Novo Nordisk Farma OY, Finland 100

•

Novo Nordisk, France 100

•

Novo Nordisk Production SAS, France 100

•

Novo Nordisk Pharma GmbH, Germany 100

•

Novo Nordisk Hellas Epe., Greece 100

•

Novo Nordisk Hungária Kft., Hungary 100

•

Novo Nordisk Biopharm Limited, Ireland 100

• •

Novo Nordisk Limited, Ireland 100

•

Novo Nordisk Ltd, Israel 100

•

Novo Nordisk S.P.A., Italy 100

•

Novo Nordisk Kazakhstan LLP, Kazakhstan 100

•

Novo Nordisk Kenya Ltd., Kenya 100

•

Novo Nordisk Pharma SARL, Lebanon 100

•

UAB Novo Nordisk Pharma, Lithuania 100

•

Novo Nordisk Farma dooel, North Macedonia 100

•

Novo Nordisk Pharma SAS, Morocco 100

•

Novo Nordisk B.V., Netherlands 100

•

Novo Nordisk Pharma Limited, Nigeria 100

•

Novo Nordisk Norway AS, Norway 100

•

Novo Nordisk Pharmaceutical Services Sp. z o.o., Poland 100

•

Novo Nordisk Pharma Sp.z.o.o., Poland 100

•

Novo Nordisk Comércio Produtos Farmacêuticos Lda., Portugal 100

•

Novo Nordisk Farma S.R.L., Romania 100

•

Novo Nordisk Limited Liability Company, Russia 100

•

Novo Nordisk Production Support LLC, Russia 100

•

Novo Nordisk Pharma d.o.o. Belgrade (Serbia), Serbia 100

•

Novo Nordisk Slovakia s.r.o., Slovakia 100

•

Novo Nordisk, d.o.o., Slovenia 100

•

Novo Nordisk (Pty) Limited, South Africa 100

•

Novo Nordisk Pharma S.A., Spain 100

•

Novo Nordisk Scandinavia AB, Sweden 100

•

Novo Nordisk Health Care AG, Switzerland 100

• •

Novo Nordisk Pharma AG, Switzerland 100

•

Novo Nordisk Tunisie SARL, Tunisia 100

•

Novo Nordisk Saglik Ürünleri Tic. Ltd. Sti., Turkey 100

•

Novo Nordisk Ukraine, LLC, Ukraine 100

•

Novo Nordisk Pharma Gulf FZ-LLC, United Arab Emirates 100

•

Novo Nordisk Holding Limited, United Kingdom 100

•

Novo Nordisk Limited, United Kingdom 100

•

Ziylo Limited, United Kingdom 100

•

Region China

Novo Nordisk (China) Pharmaceuticals Co., Ltd., China 100

• •

Novo Nordisk Region China A/S, Denmark 100

•

Beijing Novo Nordisk Pharmaceuticals Science & Technology Co., Ltd., China

100

•

Novo Nordisk Hong Kong Limited, Hong Kong 100

•

Novo Nordisk Pharma (Taiwan) Ltd., Taiwan 100

•

Rest of World

Novo Nordisk Pharma Argentina S.A., Argentina 100

•

Novo Nordisk Pharmaceuticals Pty. Ltd., Australia 100

•

Novo Nordisk Pharma (Private) Limited, Bangladesh 100

•

Novo Nordisk Produção Farmacêutica do Brasil Ltda., Brazil 100

•

Novo Nordisk Farmacêutica do Brasil Ltda., Brazil 100

•

Novo Nordisk Farmacéutica Limitada, Chile 100

•

Novo Nordisk Colombia SAS, Colombia 100

•

Novo Nordisk India Private Limited, India 100

•

Novo Nordisk Service Centre (India) Pvt. Ltd., India 100

•

PT. Novo Nordisk Indonesia, Indonesia 100

•

Novo Nordisk Pars, Iran 100

• •

Novo Nordisk Pharma Ltd., Japan 100

• •

Novo Nordisk Pharma (Malaysia) Sdn Bhd, Malaysia 100

•

Novo Nordisk Pharma Operations (Business Area) Sdn Bhd, Malaysia 100

•

Novo Nordisk Mexico S.A. de C.V., Mexico 100

•

Novo Nordisk Pharmaceuticals Ltd., New Zealand 100

•

Novo Nordisk Pharma (Private) Limited, Pakistan 100

•

Novo Nordisk Panama S.A., Panama 100

•

Novo Nordisk Peru S.A.C., Peru 100

•

Novo Nordisk Pharmaceuticals (Philippines) Inc., Philippines 100

•

Novo Nordisk Pharma (Singapore) Pte Ltd., Singapore 100

•

Novo Investment Pte Limited, Singapore 100

•

Novo Nordisk Pharma Korea Ltd., South Korea 100

•

Novo Nordisk Lanka (PVT) Ltd, Sri Lanka 100

•

Novo Nordisk Pharma (Thailand) Ltd., Thailand 93

•

Novo Nordisk Venezuela Casa de Representación C.A., Venezuela 100

•

Other subsidiaries and associated companies

NNE A/S, Denmark 100

•

NNIT A/S, Denmark 18

•

Churchill Stateside Solar Fund XIV, LLC, United States 99

•

Companies without signicant activities are not included in the list.

NNE A/S subsidiaries are not included in the list.

Part of Management´s review – not audited Novo Nordisk Annual Report 2020 / 78

Manuel

Financial denitions

(part of Management's review – not audited)

Financial ratios have been calculated in accordance with the guidelines

from the Danish Society of Financial Analysts, and supplemented by certain

key ratios for Novo Nordisk. Financial ratios are described below and in the

section 'Non-IFRS nancial measures'.

ADR

An American Depository Receipt (or ADR) represents ownership of the

shares of a non-US company and trades in US nancial markets.

Basic earnings per share (EPS)

Net prot divided by the average number of shares outstanding.

Diluted earnings per share

Net prot divided by average number of shares outstanding, including the

dilutive eect of the outstanding restricted stock units.

Eective tax rate

Income taxes as a percentage of prot before income taxes.

Gross margin

Gross prot as a percentage of sales.

Net prot margin

Net prot as a percentage of sales.

Number of shares outstanding

The total number of shares, excluding the holding of treasury shares.

Operating margin

Operating prot as a percentage of sales.

Other comprehensive income (OCI)

Other comprehensive income comprises all items recognised in equity

for the year other than those related to transactions with owners of the

company. Examples of items that are required to be presented in OCI are:

– Exchange rate adjustments of investments in subsidiaries.

– Remeasurements of dened benet plans.

– Changes in fair value of nancial instruments in a cash ow hedge.

Dividend payout ratio

Total dividends for the year as a percentage of net prot.

Purchase of intangible assets

Cash ow statement amount for the purchase of intangible assets.

Purchase of property, plant and equipment

Cash ow statement amount for the purchase of property, plant and

equipment.

The denition of capital expenditure was redened in 2019. Capital

expenditure is now dened as purchase of property, plant and equipment

from the cash ow statement. Amounts for 2016-2018 have been restated in

'Performance highlights'.

Part of Management´s review – not audited Novo Nordisk Annual Report 2020 / 79

Manuel

Solely for the purpose of calculating average net operating assets for 2019,

year-end net operating assets for 2018 have been adjusted upwards by

DKK 3,778 million to DKK 40,541 million, reecting the recognition by Novo

Nordisk of right-of-use assets of DKK 3,778 million as of 1 January 2019

in accordance with IFRS 16. Comparative gures for 2018 have not been

restated. Please refer to note 1.2.

The following table shows the reconciliation of operating prot after tax

to net operating assets with operating prot/equity in %, the most directly

comparable IFRS nancial measure:

Operating prot/equity in %

DKK million 2020 2019 2018

Operating prot

54,126 52,483 47,248

/ Equity

63,325 57,593 51,839

Operating prot/equity in % 85.5% 91.1% 91.1%

Operating prot after tax to net operating assets

DKK million 2020 2019 2018

Operating prot after tax 42,922 42,091 38,318

/ Average net operating assets 51,824 42,940 32,832

Operating prot after tax to net

operating assets in % 82.8% 98.0% 116.7%

OPAT/NOA numerator

Reconciliation of operating prot to operating prot after tax:

DKK million 2020 2019 2018

Operating prot

54,126 52,483 47,248

Tax on operating prot (using

eective tax rate) (11,204) (10,392) (8,930)

Operating prot after tax 42,922 42,091 38,318

Non-IFRS nancial

measures

(part of Management's review – not audited)

In the Annual Report, Novo Nordisk discloses certain nancial measures of

the Group’s nancial performance, nancial position and cash ows that

reect adjustments to the most directly comparable measures calculated

and presented in accordance with IFRS. These non-IFRS nancial measures

may not be dened and calculated by other companies in the same manner,

and may thus not be comparable.

The non-IFRS nancial measures presented in the Annual Report are:

– Sales and operating prot in constant exchange rates

– Operating prot after tax to net operating assets (OPAT/NOA)

– Financial reserves

– Free cash ow

– Cash to earnings

refers to an IFRS nancial measure.

Sales and operating prot growth in constant exchange rates

'Growth in constant exchange rates’ means that the eect of changes in

exchange rates is excluded. It is dened as sales/operating prot for the

period measured at the average exchange rates for the same period of the

prior year compared with net sales/operating prot for the same period of

the prior year. Price adjustments within hyperination countries as dened

in IAS 29 ‘Financial reporting in hyperination economies’ are excluded from

the calculation to avoid growth in constant exchange rates being articially

inated.

Growth in constant exchange rates is considered to be relevant information

for investors in order to understand the underlying development in sales

and operating prot by adjusting for the impact of currency uctuations.

Sales in constant exchange rates

DKK million 2020 2019 2018

Net sales

126,946 122,021 111,831

Eect of exchange rate 3,254 (3,923) 5,043

Sales in constant exchange rates 130,200 118,098 116,874

Net sales previous year 122,021 111,831 111,696

% increase/(decrease) in reported

currencies 4.0% 9.1% 0.1%

% increase/(decrease) in constant

exchange rates 6.7% 5.6% 4.6%

Operating prot in constant exchange rates

DKK million 2020 2019 2018

Operating prot

54,126 52,483 47,248

Eect of exchange rate 1,930 (2,607) 3,098

Operating prot in constant

exchange rates 56,056 49,876 50,346

Operating prot previous year 52,483 47,248 48,967

% increase/(decrease) in reported

currencies 3.1% 11.1% (3.5%)

% increase/(decrease) in constant

exchange rates 6.8% 5.6% 2.8%

Operating prot after tax to net operating assets (OPAT/NOA)

Operating prot after tax to net operating assets is dened as ‘operating

prot after tax‘ (using the eective tax rate) as a percentage of average

inventories, receivables, property, plant and equipment, intangible assets

and deferred tax assets, less non-interest-bearing liabilities including

provisions and deferred tax liabilities (where average is the sum of the

above assets and liabilities at the beginning of the year and at year-end

divided by two).

Management believes operating prot after tax to net operating assets is

a useful measure in providing investors and Management with information

regarding the Group's performance. The calculation of this nancial target

is a widely accepted measure of earnings eciency in relation to total

capital employed.

Part of Management´s review – not audited Novo Nordisk Annual Report 2020 / 80

The following table shows a reconciliation of free cash ow with net cash

generated from operating activities, the most directly comparable IFRS

nancial measure:

Free cash ow

DKK million 2020 2019 2018

Net cash generated from

operating activities

51,951 46,782 44,616

Net cash used in investing

activities

(22,436) (11,509) (12,080)

Repayment on lease liabilities (950) (822) —

Free cash ow 28,565 34,451 32,536

Cash to earnings

Cash to earnings is dened as 'free cash ow as a percentage of net prot'.

Management believes that cash to earnings is an important performance

metric because it measures the Group’s ability to turn earnings into cash.

Since Management wants this measure to capture the ability of the Group’s

operations to generate cash, free cash ow is used as the numerator instead

of net cash ow.

The following table shows the reconciliation of cash to earnings to cash ow

from operating activities/net prot in %, the most directly comparable IFRS

nancial measure:

Cash ow from operating activities/net prot in %

DKK million 2020 2019 2018

Net cash generated from

operating activities

51,951 46,782 44,616

/ Net prot

42,138 38,951 38,628

Cash ow from operating

activities/net prot in % 123.3% 120.1% 115.5%

Cash to earnings

DKK million 2020 2019 2018

Free cash ow 28,565 34,451 32,536

/ Net prot

42,138 38,951 38,628

Cash to earnings 67.8% 88.4% 84.2%

OPAT/NOA denominator

DKK million 2020 2019 2018

Intangible assets 20,657 5,835 5,145

Property, plant and equipment 50,269 50,551 41,891

Deferred income tax assets 5,865 4,121 2,893

Other receivables and

prepayments (non-current) 674 841 —

Inventories 18,536 17,641 16,336

Trade receivables 27,734 24,912 22,786

Tax receivables 289 806 1,013

Other receivables and

prepayments (current) 4,161 3,434 3,090

Deferred tax liabilities (2,502) (80) (118)

Retirement benet obligations (1,399) (1,334) (1,256)

Provisions (non-current) (4,526) (4,613) (3,392)

Trade payables (5,717) (6,358) (6,756)

Tax payables (3,913) (4,212) (4,610)

Other liabilities (17,005) (15,085) (14,098)

Provisions (current) (34,814) (31,120) (26,161)

Net operating assets 58,309 45,339 36,763

Average net operating assets

51,824 42,940 32,832

1. Average net operating assets for 2019 was calculated based on an adjusted net

operating assets gure for 2018, which was adjusted by the right-of-use assets of

DKK 3,778 million as of 1 January 2019, following the implementation of IFRS 16. As

a consequence, the net operating assets gure for 2018 was adjusted to DKK 40,541

million for the calculation of the average net operating assets for 2019.

Reconciliation of net operating assets to equity:

DKK million 2020 2019 2018

Equity 63,325 57,593 51,839

Investment in associated

companies (582) (474) (531)

Other nancial assets (1,066) (1,334) (1,242)

Derivative nancial instruments (2,332) (188) (204)

Cash at bank (12,757) (15,475) (15,638)

Borrowings – non-current 2,897 3,009 —

Borrowings – current 7,459 1,474 515

Derivative nancial instruments 1,365 734 2,024

Net operating assets 58,309 45,339 36,763

Financial reserves

'Financial reserves at the end of the year' is dened as the sum of cash and

cash equivalents at the end of the year and undrawn committed credit and

loan facilities, with a maturity of more than 12 months, less loans and bank

overdrafts classied as liabilities arising from nancing activities with obliged

repayment within 12 months of the balance sheet date.

Management believes that nancial reserves at the end of the year are an

important measure of the Group's nancial strength from an investor's

perspective, capturing the robustness of the Group's nancial position and

its nancial preparedness for unforeseen developments.

The following table reconciles total nancial reserves with cash and cash

equivalents, the most directly comparable IFRS nancial measure:

Financial reserves

DKK million 2020 2019 2018

Cash and cash equivalents

12,226 15,411 15,629

Undrawn committed credit facility 11,531 11,578 11,574

Undrawn bridge facility

5,577 — —

Borrowings

(576) (595) (506)

Financial reserves

28,758 26,394 26,697

2. Financial reserves include amounts undrawn under credit facilities and overdrafts

where the repayment of such facilities or overdrafts is not contractually required

within 12 months of the balance sheet date. Financial reserves include the DKK 5,577

million (EUR 750 million) undrawn portion of a bridge facility as the terms of the facility

provide that the maturity can be extended, at the option of Novo Nordisk, through

June 2022. In accordance with IFRS, the DKK 5,577 million (EUR 750 million) drawn

portion of the bridge facility has nevertheless been classied as current debt as it is

Management’s expectation that the facility will be repaid in 2021.

Free cash ow

Novo Nordisk used to dene free cash ow as ‘net cash generated from

operating activities’ less ‘net cash used in investing activities’.

From 1 January 2019, Novo Nordisk has dened free cash ow as ’net cash

generated from operating activities’, less ‘net cash used in investing activities’,

less repayment on lease liabilities. The updated denition reects the imple-

mentation of IFRS 16, which accordingly has a neutral eect on free cash ow.

Free cash ow is a measure of the amount of cash generated in the period

which is available for the Board to allocate between Novo Nordisk's capital

providers, through measures such as dividends, share repurchases and

repayment of debt (excluding lease liability repayments) or for retaining in

the business to fund future growth.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information Novo Nordisk Annual Report 2020 / 81

Manuel

Statement of

environmental,

social and

governance (ESG)

performance

for the year ended 31 December

Note 2020 2019 2018

Environmental performance

Resources

Energy consumption for operations (1,000 GJ) 7.1 3,191 2,993 3,099

Share of renewable power for production sites 7.1 100% 76% 77%

Water consumption for production sites (1,000 m

) 7.2 3,368 3,149 3,101

Emissions and waste

emissions from operations and transportation (1,000 tonnes) 7.3 170 306 278

Waste from production sites (1,000 tonnes) 7.4 141 124 142

Social performance

Patients

Patients reached with Novo Nordisk's Diabetes care products (estimate in millions) 8.1 32.8 30.0 29.2

– Hereof reached via the Novo Nordisk Access to Insulin Commitment (estimate in millions) 8.1 3.2 2.9 0.3

Children reached through the Changing Diabetes in Children programme (CDiC) (cumulative) 8.1 28,296 25,695 22,876

Donations and other contributions (DKK million) 8.2 158 105 103

Employees

Employees (total) 8.3 45,323 43,258 43,202

Employee turnover 8.3 7.9% 11.4% 11.7%

Employee engagement

8.3 N/A 91% 91%

Frequency of occupational accidents (number per million working hours) 8.4 1.3 2.2 2.4

Other

Animals purchased for research 8.5 50,036 49,637 65,593

Gender in management (ratio men:women) 8.6 59:41 60:40 60:40

Gender in BoD (ratio men:women) 8.6 62:38 62:38 67:33

Governance performance

Relevant employees trained in business ethics 9.1 99% 99% 99%

Business ethics reviews 9.1 32 34 33

Facilitations of the Novo Nordisk Way (total) 9.2 26 32 63

Supplier audits 9.3 177 236 294

Product recalls 9.4 — 4 3

Failed inspections 9.5 — — —

Company trust (scale 0–100) 9.6 80.6 78.2 84.5

Total tax contribution (DKK million) 9.7 26,376 27,527 25,825

Breaches of environmental regulatory limit values 9.8 15 16 27

1. Due to COVID-19, the annual employee engagement survey was replaced with more frequent and dynamic surveys tailored to local needs to ensure a continuous check-in with

employees throughout 2020.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information Novo Nordisk Annual Report 2020 / 82

Manuel

Notes to the consolidated ESG statement

Section 6

Basis of preparation

General reporting standards and principles

Novo Nordisk's annual reporting complies with the Danish Financial

Statements Act. Sections 99a, 99b and 107d specify the requirements of

the EU Directive on disclosure of non-nancial and diversity information

to report on the management of risks related to the environment, climate,

human rights, labour and social conditions, anti-corruption and gender

distribution. These requirements are addressed in the Management Review.

Novo Nordisk also adheres to the International Integrated Reporting

Framework and the AA1000AP(2018), which states that reporting must

provide a complete, accurate, relevant and balanced picture of the

organisation’s approach to and impact on stakeholders and society.

Novo Nordisk is an active member of the world's leading circular economy

network, the Ellen MacArthur Foundation.

As recommended by the Task Force on Climate-related Financial Disclosures

(TCFD), Novo Nordisk is working to integrate two climate change scenarios

into the risk management process to identify short, medium and long-term

risks within our production and supply chain:

– 2⁰C scenario, consistent with meeting the Paris Agreement Goal

(Representative Concentration Pathway RCP 2.6)

– 4⁰C scenario as an alternative high-emission scenario (RCP 8.5)

Novo Nordisk discloses in accordance with the recommendations put

forward by the Carbon Disclosure Project (CDP). For a full breakdown of

climate and water impacts, please refer to the publicly available report of

Novo Nordisk CDP disclosures.

Novo Nordisk applies AA1000AP(2018) as a component in creating

a generally applicable approach to assessing and strengthening the

credibility of the Group's public reporting of ESG information. Novo Nordisk

has designed processes to ensure that the qualitative and quantitative

information that documents the ESG dimensions of performance is

assured, as well as the systems that underpin the data and performance.

The principles outlined in AA1000AP(2018) have been applied as described

below.

Inclusivity

As a pharmaceutical business with global reach, Novo Nordisk is committed

to being accountable to those stakeholders who are impacted by the

organisation. From the perspective of social responsibility, the key

stakeholder groups are patients who rely on Novo Nordisk products,

employees at Novo Nordisk and throughout the Group's value chain,

business partners and local communities. Novo Nordisk maps its

stakeholders and has processes in place to ensure inclusion of stakeholder

concerns and expectations. In addition, Novo Nordisk continuously develops

its stakeholder engagement and capacity to be a sustainable business at

corporate, regional and aliate levels. See how Novo Nordisk denes what is

meant by sustainable business in 'Purpose & sustainability'.

Materiality

Key issues are identied through ongoing stakeholder engagement

and trendspotting, informed by data-driven analysis and addressed by

programmes or action plans with clear and measurable targets. The issues

presented in the Annual Report are deemed to have a signicant impact on

the Group's future business performance and may support stakeholders in

their decision-making.

Responsiveness

The Annual Report reects how the company is managing operations in

ways that consider and respond to stakeholder concerns and interests. The

report reaches out to a wide range of stakeholders, each with specic needs

and interests. The Annual Report is prepared with investors in mind. To

these stakeholders, however, as well as to the many other groups who may

seek information in the Annual Report, this is just one element of interaction

and communication with the company.

Impact

Understanding, measuring and communicating the positive and negative

impacts on society and the environment of Novo Nordisk's activities are

important. Novo Nordisk is currently working on developing methodologies

to be better able to do just that, covering the entire value chain.

Applying materiality

The consolidated ESG statement is a result of assessing legal requirements

and disclosure commitments applicable to Novo Nordisk. Whether

information is tied directly or indirectly to Novo Nordisk's ability to create

value over the short, medium and long term is also assessed. When

assessing whether a disclosure is material to include in the consolidated ESG

statement, Management considers whether the matter is of such relevance

and importance that it could substantively inuence the assessment by

providers of nancial capital of Novo Nordisk's ability to create value over the

short, medium and long term. See more at novonordisk.com.

Principles of consolidation

The environmental disclosures covers the production sites, laboratories and

oces with signicant activities. CO

emissions related to transportation

cover cars leased or owned by Novo Nordisk, business ights and suppliers

distributing Novo Nordisk products.

The social and governance-related disclosures cover the Novo Nordisk Group,

comprising Novo Nordisk A/S and entities controlled by Novo Nordisk A/S.

Accounting policies

The accounting policies set out below in the notes have been applied

consistently in the preparation of the consolidated ESG statement for all the

years presented.

Changes to accounting policies and disclosures

Children reached through the Changing Diabetes in Children programme

(CDiC) has been added to expand disclosure to align with the Defeat

Diabetes strategy.

Gender in the Board of Directors (BoD) (ratio men:women) has been added

to expand on the diversity reporting.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information Novo Nordisk Annual Report 2020 / 83

Manuel

7.3 CO

emissions from operations and transportation

1,000 tonnes 2020 2019 2018

Production 37 86 86

Oce buildings and laboratories 8 13 28

Product distribution 61 80 39

Business ights 19 65 63

Company cars 45 62 62

Total CO

emissions 170 306 278

Novo Nordisk has a long-term target of zero CO

emissions from operations

and transportation by 2030.

In 2020, CO

emissions from operations and transportation decreased by

44%. The decrease was due to the implementation of renewable energy

initiatives in production, as well as impacts from COVID-19 on transportation.

emissions from production decreased by 57% due to the

implementation of renewable heat and steam in Kalundborg, Denmark, wind

power in France, Algeria and Russia, and solar power in the US.

7.1 Energy consumption for operations and share of

renewable power

Energy consumption for operations

1,000 GJ 2020 2019 2018

Production 2,718 2,458 2,502

Oce buildings and laboratories 473 535 597

Total energy consumption 3,191 2,993 3,099

Energy consumption for production increased by 11% primarily due to a

new API production facility in Clayton, North Carolina. Energy consumption

in oce buildings and laboratories decreased by 12% due to both energy-

saving projects and COVID-19 shutdowns.

Energy-saving projects implemented in 2020 within production sites are

expected to result in annual savings of 94,000 GJ.

In 2020, 100% of power sourced at production sites was from renewable

energy, an increase from 76% in 2019. This is due to ve production sites,

including North America, Russia and France, now also sourcing renewable

power starting in 2020.

Accounting policies

Energy consumption for operations is measured as consumption of power,

steam, heat and fuel. The fuel is mainly from natural gas, biogas and wood.

Energy consumption is based on meter readings and invoices and covers

all energy types at production sites and laboratories and consumption of

power at oce buildings outside of production sites.

The share of renewable power used at production sites is reported

according to the Greenhouse Gas (GHG) Protocol Scope 2 Guideline. It

is calculated as the sum of power in each country that comes from 100%

renewable sources, either sourced or self-produced.

7.2 Water consumption for production sites

In 2020, production sites consumed 3,368,000 cubic metres of water,

an increase of 7% compared with 2019 due to the start-up of a new API

production facility in Clayton, North Carolina.

Four production sites, including China and Brazil, are in areas subject to

water stress or high seasonal variations. They consume 11% of the total

water for global production. Overall, water consumption at these facilities

decreased by 15% in 2020, despite adding new sites. This was due to

signicant water-saving projects implemented in China and Brazil.

Accounting policies

Water consumption is measured based on meter readings and invoices. It

includes drinking water, industrial water and steam used at production sites.

Section 7

Environmental

performance

emissions from global oces and laboratories decreased by 38% in

2020. As part of the Circular for Zero strategy, all oces and laboratories

will source renewable power by 2030. In 2020, CO

emissions from oce

buildings and laboratories decreased, primarily due to energy-saving

projects and impacts from COVID-19.

In 2020, emissions from product distribution decreased by 24%, primarily

driven by optimisation projects to move products shipped from air to sea

freight despite supply and market challenges.

emissions from business ights decreased by 71%, and emissions from

company cars decreased by 27%. This was due to impacts from COVID-19.

A full breakdown of scope 1, 2 and 3 emissions from Novo Nordisk can be

found at cdp.net.

Accounting policies

emissions from operations (production, oce buildings and

laboratories)

emissions from operations cover consumption of power, fuel, heat

and steam at oce buildings in Denmark, global production sites and

laboratories, and consumption of power in oce buildings outside Denmark.

Emissions are measured in metric tonnes, calculated according to the GHG

Protocol and based on emission factors from the previous year.

emissions from product distribution

emissions from product distribution are calculated by external

transportation suppliers as the estimated emissions from product

distribution in metric tonnes. CO

emissions are calculated based on the

worldwide distribution of semi-nished and nished products, raw materials

and components by air, sea and road between production sites and from

production sites to subsidiaries, direct customers and importing distributors.

emissions from product distribution from subsidiaries to pharmacies,

hospitals and wholesalers are not included.

emissions from business ights

emissions from business ights are estimated based on mileage

and emission factors for short, medium and long-haul ights along with

passenger class obtained from travel agencies.

emissions from company cars

emissions from company cars cover cars leased or owned by Novo

Nordisk. Emissions are calculated by multiplying emission factors by the

volumes of diesel and petrol used.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information Novo Nordisk Annual Report 2020 / 84

Section 8

Social performance

ikke hårdt linjeskift i

overskrifter

8.1 Patients reached with Novo Nordisk's Diabetes

care products

The estimated number of full-year patients reached with Novo Nordisk's

Diabetes care products increased from 30.0 million in 2019 to 32.8. million in

2020. This 9% increase was primarily driven by sales of long-acting, premix

and fast-acting insulins, human insulin and GLP-1 products.

In 2020, the estimated number of patients reached with Novo Nordisk's

Diabetes care products via the Access to Insulin Commitment was 3.2

million, compared with 2.9 million in 2019. Novo Nordisk sold insulin

according to this commitment in 34 countries of the 76 countries in scope.

Beyond this scheme, Novo Nordisk also sold human insulin below the

ceiling price in other countries, reaching an estimated additional 3.1 million

patients in 2020. Approximately 130,000 patients were reached through

human insulin vial donations to humanitarian organisations.

Through the Changing Diabetes in Children programme, 28,296 children

had been reached by the end of 2020, compared with 25,695 in 2019.

Accounting policies

The number of full-year patients reached with Novo Nordisk's Diabetes

care products, excluding devices and PrandiMet

, is estimated by dividing

Novo Nordisk's annual sales volume by the annual usage dose per patient

for each product class as dened by the World Health Organization (WHO).

PrandiMet

is not included as no WHO-dened dosage exists. WHO has not

yet assigned a daily dose for Rybelsus

. For this calculation, it is assumed

that one tablet equals one patient treatment day.

The number of full-year patients reached with Novo Nordisk's Diabetes care

products (human insulin in vials) via the Access to Insulin Commitment (AtIC)

is estimated by dividing Novo Nordisk's annual sales volume by the annual

usage dose per patient reached via the AtIC as dened by WHO.

The WHO-dened daily dosage has not changed since 1982, except for

Victoza

which was changed in 2019, and may not accurately reect

the recommended or prescribed daily dose. Actual doses are based on

individual characteristics (e.g. age and weight) and pharmacokinetic

considerations. Despite this uncertainty, Novo Nordisk assesses this to be

the most consistent way of reporting.

The number of children reached with free diabetes care treatment through

the Changing Diabetes in Children programme is measured as the total

accumulated number of children reached at the end of the year since 2009,

when the programme was initiated.

8.2 Donations and other contributions

Donations and other contributions

DKK million 2020 2019 2018

World Diabetes Foundation (WDF) 138 86 85

Novo Nordisk Haemophilia

Foundation (NNHF) 20 19 18

Total donations and other

contributions 158 105 103

The WDF, an independent trust, supports sustainable partnerships and acts

as a catalyst to help others do more. In 2020, the WDF provided funding to

21 partnership projects in 22 countries. The projects focus on awareness,

education and capacity-building at local, regional and global levels The

amount granted to WDF in 2020 covers i.a. the donation approved by the

Annual General Meeting in 2020 and a special one-o contribution. See note

5.2 in the consolidated nancial statements and worlddiabetesfoundation.org

for additional information.

The NNHF supports programmes in low- and middle-income countries.

Initiatives focus on capacity-building, diagnosis and registry, awareness and

advocacy. Since 2005, the NNHF has provided funding for 296 programmes

in 78 countries. See nnhf.org.

Furthermore, DKK 165 million was granted to the Antimicrobial Resistance

Research (AMR) Action Fund, the largest collective fund ever established

to support vital research into antimicrobial resistance research and

development. It is categorised as an equity investment and therefore not

expensed in the income statement.

Accounting policies

Donations and other contributions by Novo Nordisk to the WDF and the

NNHF are recognised as an expense when the donation or contribution is

paid out or when an unconditional commitment to donate has been made.

7.4 Waste from production sites

Waste from production sites

1,000 tonnes 2020 2019 2018

Organic residues

108 89 93

Other (paper, cardboard, metals, etc.) 8 8 12

Total recycling 116 97 105

Ethanol waste

9 13 22

Other (various combustible waste) 6 5 6

Total waste with energy recovery

15 18 28

Water waste 5 5 4

Other 4 3 4

Total waste with no energy recovery

9 8 8

Total waste to landll 1 1 1

Total waste 141 124 142

1. Organic residues for recycling are waste from the production of the active

pharmaceutical ingredients, where the energy is recovered in biogas plants and the

digested slurry is used on local farmland as fertiliser.

2. Ethanol is used in purication of Diabetes care and Biopharm products. The ethanol

is recovered in internal regeneration plants and re-used many times. The ethanol

waste reported here is from production with no regeneration or residues from the

regeneration process.

3. Energy recovery is waste disposed of at waste-to-energy plants and at a biogas plant.

4. Water waste and other waste not suitable for other disposal methods, such as

hazardous waste for incineration and various other types of waste.

In 2020, waste from production sites increased by 14% compared with 2019.

The amount of waste recycled increased by 20% in 2020 primarily due to an

increase in production in Kalundborg, Denmark.

The amount of waste sent for energy recovery decreased by 17% primarily

due to a distillation method within API production to reuse ethanol

internally instead of sending it for incineration with energy recovery.

In 2020, 93% of the total waste from production sites was recycled, used for

biogas production or incinerated at plants where the energy is used for heat

and power production. Less than 1% of total waste was sent to landll.

14% of the waste is categorised as hazardous waste, a decrease from 18%

in 2019. This reduction was due to a reduction in ethanol waste from the

production of API for Diabetes and Obesity care.

Accounting policies

Waste is measured as the sum of all the waste disposed of at production

sites based on weight receipts.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information Novo Nordisk Annual Report 2020 / 85

8.5 Animals purchased for research

Animals purchased

Number 2020 2019 2018

Mice, rats and other rodents 38,850 48,081 63,547

Pigs 783 880 1,023

Rabbits 239 349 641

Dogs 91 157 100

Non-human primates 264 168 278

Fish (larvae) 9,804 — —

Other vertebrates 5 2 4

Total animals purchased 50,036 49,637 65,593

The number of animals purchased for research in 2020 increased by 1%

compared with 2019 due to the purchase of sh. The overall development

reects the changes in stages of the dierent research projects. However,

for 2020 the animals purchased for research are also impacted by the overall

COVID-19 situation. The reduction in the number of rodents purchased also

reects Novo Nordisk's continuous focus on reducing the number of animals

per research project. 78% of the animals purchased were rodents.

8.4 Frequency of occupational accidents

The average frequency rate of occupational accidents with absence was 1.3

accidents per million working hours in 2020, compared with 2.2 in 2019,

due to a 39% decrease in the number of accidents. In 2020, as in 2019,

Novo Nordisk had one work-related fatality. The signicant decrease in the

number of occupational accidents is attributed to the global COVID-19-

related lockdown. Our production sites, which have remained in operation

during the lockdown, also show a decline in the number of occupational

accidents with absence. Novo Nordisk works with a zero-injury mindset and

has a long-term commitment to continuously improving safety performance.

Accounting policies

The frequency of occupational accidents with absence is measured as the

internally reported number of accidents using full-time employees, excluding

externals, employees on unpaid leave, interns, bachelor and master

thesis employees and substitutes, per million nominal working hours. An

occupational accident with absence is any work-related accident causing at

least one day of absence in addition to the day of the accident.

8.6 Gender diversity

Gender in management

Ratio men:women 2020 2019 2018

EVP, SVP 76:24 82:18 87:13

CVP, VP, GM 64:36 66:34 66:34

Director, Manager, Team Leader 58:42 59:41 60:40

Gender in management (overall) 59:41 60:40 60:40

Gender in BoD 62:38 62:38 67:33

All management teams, from entry level upwards, are encouraged to focus

on enhanced diversity, with the aim of ensuring a robust pipeline of talent

for management positions. For additional information about diversity at

executive management level and at BoD level see page 42 - 45.

Gender diversity in management overall remained approximately the same

as in 2019. Among employees as a whole, the gender split was 49% women

and 51% men in 2020, the same as in 2019.

Accounting policies

Diversity at Novo Nordisk is reported as the percentage split by gender in

all managerial positions. Managerial positions are dened as all managers

at Novo Nordisk (global job level including Executive Vice Presidents (EVP),

Senior Vice Presidents (SVP), Corporate Vice Presidents (CVP), Vice Presidents

(VP), General Managers (GM), Directors, Managers and Team Leaders).

Diversity at Board of Directors-level is reported as the percentage split by

gender among the members.

8.3 Employees

Employees

Number 2020 2019 2018

North America Operations 6,213 6,190 6,093

International Operations: 39,110 37,068 37,109

EMEA (Europe, the Middle East and Africa) 24,600 23,540 24,517

- of which in Denmark 17,538 16,747 17,461

China (Mainland China, Hong Kong, Taiwan) 5,548 5,263 4,636

Rest of World (all other countries) 8,962 8,265 7,956

Total employees 45,323 43,258 43,202

Full-time employees 44,723 42,703 42,672

The growth in employees was mainly driven by International Operations,

with the highest growth rate in China. Novo Nordisk also continues to

increase the number of employees in Global Business Services in India,

which grew by 14% compared with last year.

The employee turnover rate decreased signicantly from 11.4% in 2019 to

7.9% in 2020, and it is assumed to be related to the COVID-19 pandemic.

Accounting policies

The number of employees is recorded as all employees except externals,

employees on unpaid leave, interns, bachelor and master thesis employees

and substitutes at year-end.

Employees are attributed to geographical regions according to their

primary workplace across the commercial units, research and development,

production and support functions. Employees in corporate functions are

included in EMEA, and employees in Global Business Service in Bangalore,

India are included in Rest of World.

The rate of turnover is measured as the number of employees, excluding

temporary employees, who left the Group during the nancial year divided

by the average number of employees, excluding temporary employees.

Employees working for Group companies that have been disposed of are

not counted as having left the Group.

Employee engagement is measured on a scale of 1–5 and based on

questions relating to employee engagement in the annual employee survey,

OurVoice. The score is calculated as the proportion of employees who

responded favourably (4 or 5) to relevant questions.

Accounting policies

The record of animals purchased for research comprises the number of

animals purchased for all research undertaken by Novo Nordisk either

in-house or by external contractors. The number of animals purchased is

based on internal registration of purchased animals and yearly reports from

external contractors.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information Novo Nordisk Annual Report 2020 / 86

9.5 Failed inspections

In 2020, as in 2019, there were no failed inspections among those resolved

at year-end. During the year, 77 inspections were conducted, compared

with 66 in 2019. At year-end, 59 inspections were passed and 18 were

unresolved, as nal inspection reports had not been received or the nal

authority acceptance was pending, which is normal. Follow-up on unresolved

inspections continues in 2021.

Accounting policies

The number of failed inspections is measured in relation to inspections by

the US Food & Drug Administration (USFDA), the European Medicines Agency

(EMA), the Notied Body (TÜV SUD) and domestic authorities for strategic

manufacturing sites. Failed inspections are dened as inspections where

Warning Letters or EMA non-compliance letters related to GMP inspections

are received, GMP/ISO certicates for strategic sites are lost, pre-approval

inspections result in a Warning Letter, study conclusions are changed

due to GCP/GLP inspection issues, or marketing or import authorisations

are withdrawn due to inspection issues. Strategic sites are dened as the

manufacturing sites in Brazil, China, Denmark, France and the US.

9.6 Company trust

Company trust

Scale 0-100 2020 2019 2018

People with diabetes 80.4 78.1 78.6

General practitioners 76.1 75.3 85.7

Diabetes specialists 85.2 81.3 89.2

Total score (average) 80.6 78.2 84.5

Accounting policies

Company trust is measured annually. The total score is measured as

the mean company trust score among people with diabetes, general

practitioners and diabetes specialists across key markets. Trust is measured

on a scale of 0–100, with 100 being the best possible score. A score above

80 is considered excellent; a score between 70 and 80 is considered strong.

Data were collected between June and July 2020.

The data are collected through annual surveys carried out by external

consultancy rms.

Section 9

Governance

performance

9.3 Supplier audits

Supplier audits

Number 2020 2019 2018

Responsible sourcing audits 7 27 19

Quality audits 170 209 275

Total supplier audits 177 236 294

The number of audits concluded in 2020 decreased by 25% compared with

2019. The decrease was due to COVID-19-related restrictions imposed

on travel and general ability to access suppliers' facilities and subsequent

postponement of planned audits. No critical ndings were issued related to

responsible sourcing audits, while one critical nding was issued related to

quality audits regarding handling of controlled waste. A follow-up audit has

since been conducted, where the nding was found to have been closed

satisfactorily.

Accounting policies

The number of supplier audits concluded by Novo Nordisk's Corporate

Quality function consists of the number of responsible sourcing audits and

quality audits conducted at suppliers.

employees and management are interviewed. Identied gaps and

improvement opportunities related to the Novo Nordisk Way are presented

to and discussed with management. The facilitators and management agree

on an action plan to address those gaps and improvement opportunities.

9.2 Facilitations of the Novo Nordisk Way

In 2020, a total of 26 units were facilitated and more than 1,200 employees,

were individually interviewed. In addition, feedback on those units was

collected from approximately 340 stakeholders.

Overall, the 2020 process continues to show a good level of adherence

to the Novo Nordisk Way. Three units were found to be in breach of one

or more of the Novo Nordisk Essentials. The Essential with the strongest

performance continues to be the 'Patient-centred business approach'.

In 2020, partly driven by the focus on strengthening the culture journey,

signicantly more ndings were issued related to the Essential 'We set

ambitious goals and strive for excellence'.

Accounting policies

Facilitations of the Novo Nordisk Way is measured as the number of

facilitations and culture coaching sessions completed. Both are internal

processes for assessing adherence with the Novo Nordisk Way. The

assessments are based on review of documentation and feedback from

stakeholders followed by an on-site visit during which randomly selected

9.4 Product recalls

Novo Nordisk had no product recalls from the market in 2020, compared

with four in 2019. To verify that the product recall process remains robust

and ecient, a mock recall was eectuated in 18 aliates worldwide. Based

on that, the product recall process has been evaluated and concluded to be

eective.

Accounting policies

The number of product recalls is recorded as the number of times Novo

Nordisk has instituted a recall and includes recalls in connection with clinical

trials. A recall can aect various countries.

9.1 Business ethics

Accounting policies

The mandatory business ethics training is based on the Business Ethics

Code of Conduct in the form of globally applicable e-learning, and related

tests released annually by the Novo Nordisk Business Ethics Compliance

Oce. The percentage of employees completing the training is calculated as

the percentage of completion of training in both the Code of Conduct and

related tests, based on internal registrations.

The number of business ethics reviews is recorded as the number of

business ethics reviews performed by Group Internal Audit in subsidiaries,

production sites and headquarter areas.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information Novo Nordisk Annual Report 2020 / 87

9.8 Breaches of environmental regulatory limit values

In 2020, there were 15 breaches, a decrease from 16 breaches in 2019. The

breaches were mainly related to wastewater, and all had a minor impact on

the environment.

Accounting policies

Breaches of regulatory limit values cover all breaches reported to the

environmental authorities.

9.7 Total tax contribution

Total tax contribution 2020 2019 2018

DKK million

Taxes

borne

Taxes

collected

Corporate income taxes paid 10,106 3,471 13,577 14,392 13,006

Employment taxes 1,549 8,039 9,588 9,638 9,427

Indirect taxes 1,307 1,190 2,497 2,610 2,257

Other taxes 714 — 714 887 1,135

Total 13,676 12,700 26,376 27,527 25,825

The total tax contribution in 2020 amounted to DKK 26,376 million split with

52% on taxes borne and 48% on taxes collected. In 2019, the split was 54%

on taxes borne (DKK 14,829 million) and 46% on taxes collected (DKK 12,698

million).

The overall decrease in total tax contribution from 2019 to 2020 is primarily

related to 'Corporate income taxes paid' . This is mainly due to less

prepayment in Denmark as a consequence of acquisitions in the end of 2020.

Accounting policies

Novo Nordisk's total tax contribution is measured as the taxes borne or

collected by Novo Nordisk, which have been paid in the respective year.

Taxes borne are dened as taxes where Novo Nordisk carries the cost. Taxes

collected are dened as taxes collected by Novo Nordisk on behalf of others,

e.g. employee income taxes deducted from the employee salaries and paid

on to the government.

Corporate income taxes paid

Corporate income taxes paid primarily consists of corporate income taxes

and withholding taxes on company dividends paid during the year.

Employment taxes

Employment taxes primarily consist of taxes collected from the employees

on behalf of the government and social security costs (part of payroll taxes in

some countries).

Indirect taxes

Indirect taxes consist of non-refundable VAT, net VAT collections, customs

duties, environmental taxes and property taxes.

Other taxes

Other taxes consist of country-specic taxes not linked to one of the

categories above, e.g. the US branded prescription drug (BPD) fee.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Statement by BoD and Management / Additional information Novo Nordisk Annual Report 2020 / 88

Manuel Statement by the Board of Directors and

Executive Management on the 2020 Annual Report

Today, the Board of Directors and Executive Management approved the

Annual Report of Novo Nordisk A/S for the year 2020. The Board of Directors

and Executive Management are jointly responsible for ensuring the integrity

and quality of the report.

The Annual Report has been prepared in accordance with the International

Integrated Reporting Framework. The Consolidated Financial Statements

have been prepared in accordance with International Financial Reporting

Standards (IFRS) as issued by the International Accounting Standards Board

and in accordance with IFRS as endorsed by the EU and further requirements

in the Danish Financial Statements Act.

Further, the Financial statements of the Parent Company and Management’s

Review have been prepared in accordance with the Danish Financial

Statements Act.

In our opinion, the Consolidated Financial Statements and the Financial

statements of the Parent Company give a true and fair view of the

nancial position at 31 December 2020, the results of the Group’s and

Parent Company’s operations, and consolidated cash ows for the

nancial year 2020. Furthermore, in our opinion, Management's Review

includes a true and fair account of the development in the operations

and nancial circumstances, of the results for the year and of the nancial

position of the Group and the Parent Company as well as a description of

the most signicant risks and elements of uncertainty facing the Group

and the Parent Company.

In our opinion, the Annual Report of Novo Nordisk A/S for the nancial

year 1 January to 31 December 2020 identied as NOVO-2020-12-31.zip is

prepared, in all material respects, in compliance with the ESEF Regulation.

Novo Nordisk’s Consolidated Environmental, Social and Governance

Statements have been prepared in accordance with the reporting

principles of materiality, inclusivity, responsiveness and impact of

AA1000AP(2018) and environmental, social and governance accounting

policies. They give a true and fair account and a balanced and

reasonable presentation of the organisation’s environmental, social and

governance performance in accordance with these principles.

We recommend that the Annual Report be adopted at the Annual

General Meeting.

Bagsværd, 3 February 2021

Registered Executive Management Board of Directors

Lars Fruergaard Jørgensen

President and CEO

Karsten Munk Knudsen

CFO

Helge Lund

Chair

Jeppe Christiansen

Vice chair

Brian Daniels

Monique Carter Camilla Sylvest Laurence Debroux Andreas Fibig Sylvie Grégoire

Mads Krogsgaard Thomsen Henrik Wul Liz Hewitt Mette Bøjer Jensen Kasim Kutay

Anne Marie Kverneland Martin Mackay

Thomas Rantzau Stig Strøbæk

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Independent Auditor’s Reports / Additional information Novo Nordisk Annual Report 2020 / 89

Manuel Independent

Auditor’s Reports

To the shareholders of Novo Nordisk A/S

Report on the audit of the Financial Statements

Our opinion

In our opinion, the Consolidated Financial Statements give a true and fair view of

the Group’s nancial position at 31 December 2020 and of the results of the Group’s

operations and cash ows for the nancial year 1 January to 31 December 2020 in

accordance with International Financial Reporting Standards (IFRS) as issued by the

International Accounting Standards Board and in accordance with IFRS as endorsed by

the EU and further requirements in the Danish Financial Statements Act.

Moreover, in our opinion, the Parent Company Financial Statements give a true and fair

view of the Parent Company’s nancial position at 31 December 2020 and of the results

of the Parent Company’s operations for the nancial year 1 January to 31 December 2020

in accordance with the Danish Financial Statements Act.

Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee

and the Board of Directors.

What we have audited

The Consolidated Financial Statements of Novo Nordisk A/S for the nancial year 1

January to 31 December 2020, section ‘Consolidated nancial statements’, comprise

income statement and statement of comprehensive income, cash ow statement,

balance sheet, equity statement and notes, including summary of signicant accounting

policies.

The Parent Company Financial Statements of Novo Nordisk A/S for the nancial year 1

January to 31 December 2020, section ‘Financial Statements of the Parent Company’,

comprise income statement, balance sheet, equity statement and notes, including

summary of signicant accounting policies.

Collectively referred to as the “Financial Statements”.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs)

and the additional requirements applicable in Denmark. Our responsibilities under those

standards and requirements are further described in the Auditor’s responsibilities for the

audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sucient and appropriate to provide

a basis for our opinion.

Independence

We are independent of the Group in accordance with the International Ethics Standards

Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the

additional requirements applicable in Denmark. We have also fullled our other ethical

responsibilities in accordance with the IESBA Code.

To the best of our knowledge and belief, prohibited non-audit services referred to in Article

5(1) of Regulation (EU) No 537/2014 were not provided.

Appointment

We were rst appointed auditors of Novo Nordisk A/S in April 1982 for the nancial year

1982. We have been reappointed annually by shareholder resolution for a total period

of uninterrupted engagement of 39 years including the nancial year 2020.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most

signicance in our audit of the Financial Statements for 2020. These matters were

addressed in the context of our audit of the Financial Statements as a whole, and in

forming our opinion thereon, and we do not provide a separate opinion on these

matters.

Key audit matter How our audit addressed the key audit matter

Revenue recognition relating to rebates and discounts in the US business

The Group sells to various customers in the US, which can fall under certain commercial

and government mandated contracts and reimbursement arrangements, of which the

most signicant are Managed Care, Medicare, Medicaid and charge-backs to wholesalers.

These arrangements result in deductions to gross sales in arriving at net sales and

give rise to obligations for the Group to provide customers with rebates, discounts and

allowances, which for unsettled amounts are recognised as an accrual.

We focused on this area because rebates, discounts and allowances are complex and

because establishing an appropriate accrual requires signicant judgement and estimation

by Management. This judgement is particularly complex in a US healthcare environment in

which competitive pricing pressure and product discounting are growing trends.

Refer to Note 2.1 and Note 3.6.

We obtained Management’s calculations for accruals under applicable schemes and

assessed the signicance of assumptions applied by comparing them to the stated

commercial policies, the terms of the applicable contracts, third party data and historical

levels of paid rebates and discounts in the US business.

We compared the assumptions to contracted prices, historical rebates, discounts,

allowances and to current payment trends. We also considered the historical accuracy of

the Group’s estimates.

We formed an independent assessment of the most signicant elements of the accrual

at 31 December 2020 using third party data and compared this expectation to the actual

accrual recognised.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Independent Auditor’s Reports / Additional information Novo Nordisk Annual Report 2020 / 90

Manuel

Hellerup, 3 February 2021

PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab

CVR no 3377 1231

Mogens Nørgaard Mogensen

State Authorised Public Accountant

mne21404

Mads Melgaard

State Authorised Public Accountant

mne34354

Statement on Management’s Review

Management is responsible for Management’s Review, section ‘Managements review’.

Our opinion on the Financial Statements does not cover Management’s Review, and we

do not express any form of assurance conclusion thereon.

In connection with our audit of the Financial Statements, our responsibility is to read

Management’s Review and, in doing so, consider whether Management’s Review is

materially inconsistent with the Financial Statements or our knowledge obtained in the

audit, or otherwise appears to be materially misstated.

Moreover, we considered whether Management’s Review includes the disclosures

required by the Danish Financial Statements Act.

Based on the work we have performed, in our view, Management’s Review is in

accordance with the Consolidated Financial Statements and the Parent Company

Financial Statements and has been prepared in accordance with the requirements of

the Danish Financial Statements Act. We did not identify any material misstatement in

Management’s Review.

Management’s responsibilities for the Financial Statements

Management is responsible for the preparation of consolidated nancial statements that

give a true and fair view in accordance with International Financial Reporting Standards

(IFRS) as issued by the International Accounting Standards Board and in accordance with

IFRS as endorsed by the EU and further requirements in the Danish Financial Statements

Act and for the preparation of parent company nancial statements that give a true and

fair view in accordance with the Danish Financial Statements Act, and for such internal

control as Management determines is necessary to enable the preparation of nancial

statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, Management is responsible for assessing the

Group’s and the Parent Company’s ability to continue as a going concern, disclosing,

as applicable, matters related to going concern and using the going concern basis of

accounting unless Management either intends to liquidate the Group or the Parent

Company or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial

Statements as a whole are free from material misstatement, whether due to fraud or

error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is

a high level of assurance, but is not a guarantee that an audit conducted in accordance

with ISAs and the additional requirements applicable in Denmark will always detect

a material misstatement when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the aggregate, they could reasonably

be expected to inuence the economic decisions of users taken on the basis of these

Financial Statements.

As part of an audit in accordance with ISAs and the additional requirements applicable

in Denmark, we exercise professional judgement and maintain professional scepticism

throughout the audit.

We also:

– Identify and assess the risks of material misstatement of the Financial Statements,

whether due to fraud or error, design and perform audit procedures responsive to

those risks, and obtain audit evidence that is sucient and appropriate to provide

a basis for our opinion. The risk of not detecting a material misstatement resulting

from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

– Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the eectiveness of the Group’s and the Parent Company’s

internal control.

– Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by Management.

– Conclude on the appropriateness of Management’s use of the going concern basis of

accounting and based on the audit evidence obtained, whether a material uncertainty

exists related to events or conditions that may cast signicant doubt on the Group’s

and the Parent Company’s ability to continue as a going concern. If we conclude

that a material uncertainty exists, we are required to draw attention in our auditor’s

report to the related disclosures in the Financial Statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are based on the audit evidence

obtained up to the date of our auditor’s report. However, future events or conditions

may cause the Group or the Parent Company to cease to continue as a going concern.

– Evaluate the overall presentation, structure and content of the Financial Statements,

including the disclosures, and whether the Financial Statements represent the

underlying transactions and events in a manner that achieves fair presentation.

– Obtain sucient appropriate audit evidence regarding the nancial information of

the entities or business activities within the Group to express an opinion on the

Consolidated Financial Statements. We are responsible for the direction, supervision

and performance of the group audit. We remain solely responsible for our audit

opinion.

We communicate with those charged with governance regarding, among other matters,

the planned scope and timing of the audit and signicant audit ndings, including any

signicant deciencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied

with relevant ethical requirements regarding independence, and to communicate with

them all relationships and other matters that may reasonably be thought to bear on our

independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine

those matters that were of most signicance in the audit of the Financial Statements of

the current period and are therefore the key audit matters. We describe these matters

in our auditor’s report unless law or regulation precludes public disclosure about the

matter or when, in extremely rare circumstances, we determine that a matter should not

be communicated in our report because the adverse consequences of doing so would

reasonably be expected to outweigh the public interest benets of such communication.

Report on compliance with the ESEF Regulation

As part of our audit of the Financial Statements we performed procedures to express

an opinion on whether the Annual Report of Novo Nordisk A/S for the nancial year 1

January to 31 December 2020 with the le name NOVO-2020-12-31.zip is prepared, in

all material respects, in compliance with the Commission Delegated Regulation (EU)

2019/815 on the European Single Electronic Format (ESEF Regulation) which includes

requirements related to the preparation of the Annual Report in XHTML format and iXBRL

tagging of the Consolidated Financial Statements.

Management is responsible for preparing an Annual Report that complies with the ESEF

Regulation. This responsibility includes:

– The preparation of the Annual Report in XHTML format;

– The selection and application of appropriate iXBRL tags, including extensions to the

ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all nancial

information required to be tagged using judgement where necessary;

– Ensuring consistency between iXBRL tagged data and the Consolidated Financial

Statements presented in human-readable format; and

– For such internal control as Management determines necessary to enable the

preparation of an Annual Report that is compliant with the ESEF Regulation.

Our responsibility is to obtain reasonable assurance on whether the Annual Report is

prepared, in all material respects, in compliance with the ESEF Regulation based on the

evidence we have obtained, and to issue a report that includes our opinion. The nature,

timing and extent of procedures selected depend on the auditor’s judgement, including

the assessment of the risks of material departures from the requirements set out in the

ESEF Regulation, whether due to fraud or error. The procedures include:

– Testing whether the Annual Report is prepared in XHTML format;

– Obtaining an understanding of the company’s iXBRL tagging process and of internal

control over the tagging process;

– Evaluating the completeness of the iXBRL tagging of the Consolidated Financial

Statements;

– Evaluating the appropriateness of the company’s use of iXBRL elements selected from

the ESEF taxonomy and the creation of extension elements where no suitable element

in the ESEF taxonomy has been identied;

– Evaluating the use of anchoring of extension elements to elements in the ESEF

taxonomy; and

– Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements.

In our opinion, the Annual Report of Novo Nordisk A/S for the nancial year 1 January to

31 December 2020 with the le name NOVO-2020-12-31.zip is prepared, in all material

respects, in compliance with the ESEF Regulation.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG Assurance Report / Additional information Novo Nordisk Annual Report 2020 / 91

Manuel

Hellerup, 3 February 2021

PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab

CVR no 3377 1231

Mogens Nørgaard Mogensen

State Authorised Public Accountant

mne21404

Mads Melgaard

State Authorised Public Accountant

mne34354

Independent Assurance Report on the ESG statement

To the Stakeholders of Novo Nordisk A/S

Novo Nordisk A/S engaged us to provide limited assurance on the Consolidated ESG

statement stated in the Annual Report of Novo Nordisk for the year ended 31 December

2020.

Our conclusion

Based on the procedures we performed and the evidence we obtained:

A. nothing has come to our attention that causes us to believe that the Consolidated ESG

statement of Novo Nordisk’s Annual Report for the year ended 31 December 2020 has

not been prepared, in all material respects, in accordance with the Reporting Criteria;

and

B. nothing has come to our attention that causes us to believe that the description of

Novo Nordisk’s alignment with the AA1000 Accountability Principles (AA1000AP) (2018)

of Inclusivity, Materiality, Responsiveness and Impact is not fairly stated.

This conclusion is to be read in the context of what we say in the remainder of our report.

What we are assuring

The scope of our work was limited to assurance over:

A. the Consolidated ESG statement and associated notes on pages 81 - 87 in the Annual

Report of Novo Nordisk;

B. Novo Nordisk’s description of alignment with the AA1000AP principles of Inclusivity,

Materiality, Responsiveness and Impact for the year ended 31 December 2020 which is

set out on page 82 (the stakeholder engagement description) of the Annual Report.

Professional standards applied and level of assurance

We performed a limited assurance engagement in accordance with International

Standard on Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than

Audits and Reviews of Historical Financial Information’ and, in respect of the greenhouse

gas emissions stated on pages 81 and 83 in accordance with International Standard on

Assurance Engagements 3410 ‘Assurance engagements on greenhouse gas statements’

and AA1000 Assurance Standard (AA1000AS, 2008) with 2018 Addendum (Type 2,

moderate, which is the equivalent to ISAE 3000 limited assurance). A limited assurance

engagement is substantially less in scope than a reasonable assurance engagement in

relation to both the risk assessment procedures, including an understanding of internal

control, and the procedures performed in response to the assessed risks; consequently,

the level of assurance obtained in a limited assurance engagement is substantially

lower than the assurance that would have been obtained had a reasonable assurance

engagement been performed.

Our independence and quality control

We have complied with the Code of Ethics for Professional Accountants issued by the

International Ethics Standards Board for Accountants, which includes independence and

other ethical requirements founded on fundamental principles of integrity, objectivity,

professional competence and due care, condentiality and professional behaviour. We

also qualify as independent as dened by the AA1000AS. The rm applies International

Standard on Quality Control 1 and accordingly maintains a comprehensive system of

quality control including documented policies and procedures regarding compliance

with ethical requirements, professional standards and applicable legal and regulatory

requirements. Our work was carried out by an independent multidisciplinary team with

experience in sustainability reporting and assurance.

Understanding reporting and measurement methodologies

The Consolidated ESG statement needs to be read and understood together with the

Reporting Criteria (pages 82 - 87), which Novo Nordisk A/S is solely responsible for selecting

and applying. The absence of a signicant body of established practice on which to draw

to evaluate and measure non-nancial information allows for dierent, but acceptable,

measurement techniques and can aect comparability between entities and over time.

Work performed

A. We are required to plan and perform our work in order to consider the risk of material

misstatement of the Consolidated ESG statement. In doing so, we:

– conducted interviews to understand the key processes and control activities for

reporting data;

– obtained an understanding of the key processes and controls for managing, recording

and reporting;

– performed limited substantive testing on a selective basis to check that data had been

appropriately measured, recorded, collated and reported;

– performed analysis of data selected on the basis of risk and materiality to the group;

– made inquiries to signicant development in reported data;

– considered the presentation and disclosure of the Consolidated ESG statement; and

– assessed that the process for reporting greenhouse gas emissions data comply with

the principles of relevance, completeness, consistency, transparency and accuracy

outlined in the greenhouse gas protocol (2003).

B. In respect of Novo Nordisk’s description of alignment with the AA1000AP of Inclusivity,

Materiality, Responsiveness and Impact we performed the following activities:

– interviewed members of Novo Nordisk’s Board of Directors and Executive Management

team, representatives responsible for Corporate and Commercial Strategy at global

level and within International Operations, key employees in Global Public Aairs

and Sustainability to determine their understanding of Novo Nordisk’s stakeholders,

the mechanisms used to engage them and key issues that are of interest to each

stakeholder group;

– interviewed external stakeholders to determine their perception of Novo Nordisk’s

stakeholder engagement capabilities, particularly, in relation to understanding and

responding to material concerns, needs and desires linked to access and aordability

regarding medicin and Circular for Zero;

– reviewed evidence on a selective basis to support the assertions made in these

interviews and in the stakeholder engagement description;

– conrmed the systems and procedures to support Novo Nordisk’s governance for

responsible business conduct and stakeholder relationships. Our work focused on

how Novo Nordisk intends to deliver on the Atrategic Aspiration of Purpose and

sustainability and to what extend it is aligned with stakeholder needs and concerns and

Novo Nordisk’s aim of being a truly sustainable company; and

– assessed the disclosure and presentation of the stakeholder engagement description.

Novo Nordisk’s responsibilities

Management are responsible for:

– designing, implementing and maintaining internal controls over information relevant

to the preparation of the Consolidated ESG statement that is free from material

misstatement, whether due to fraud or error;

– establishing objective Reporting Criteria for preparing the Consolidated ESG statement;

– preparing the greenhouse gas protocol statement in accordance with the dened

Reporting Criteria. Greenhouse gas quantication is subject to inherent uncertainty

because of incomplete scientic knowledge used to determine emissions factors and

the values needed to combine emissions of dierent gases;

– measuring and reporting the Consolidated ESG statement based on the Reporting

Criteria; and

– the content of the Annual Report 2020.

Our responsibility

We are responsible for:

– planning and performing the engagement to obtain limited assurance about whether

the Consolidated ESG statement is free from material misstatement, whether due to

fraud or error;

– forming an independent conclusion, based on the procedures we performed and the

evidence we obtained; and

– reporting our conclusion to the Stakeholders of Novo Nordisk A/S.

Observations and recommendations

According to AA1000AS, we are required to include observations and recommendations

for improvements in relation to adherence to the AA1000AP. We have no signicant

recommendations regarding Inclusivity, Materiality, Responsiveness and Impact. We

have communicated a number of minor recommendations for improvement to the

Management.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 92

Manuel More information

Additional reporting

Novo Nordisk provides additional disclosure to satisfy legal requirements

and stakeholder interests. Supplementary reports can be downloaded from

novonordisk.com/annualreport, while additional information can be found at

novonordisk.com

Materiality

Novo Nordisk leans on the International Integrated Reporting Council’s

denition of materiality. Information deemed material for providers of

nancial capital in their decision-making is included in the Annual Report, i.e.

of such relevance and importance that it could substantively inuence their

assessments of Novo Nordisk’s ability to create value over the short, medium

and long term. See how Novo Nordisk determines materiality and material

issues at novonordisk.com

Annual Report

This Annual Report is Novo Nordisk’s full statutory Annual Report pursuant

to Section 149(1) of the Danish Financial Statements Act.

The statutory Annual Report will be presented and adopted at the annual

general meeting on 25 March 2021 and will subsequently be submitted to

and be available at the Danish Business Authority.

The Annual Report is prepared in accordance with the International Financial

Reporting Standards and the Danish Financial Statements Act. Moreover,

it meets the requirements of an integrated report, as per the International

Integrated Reporting Framework.

The Annual Report also meets the requirements for Communication on

Progress to the UN Global Compact, a voluntary reporting on performance

towards its 10 principles on human rights, labour rights, environment and

anti-corruption and additional progress reporting on corporate sustainability

leadership and UN goals. The Annual Report also adheres to the UN Guiding

Principles Reporting Framework on respect of human rights.

Form 20 F

The Form 20-F is led using a standardised reporting form so that investors

can evaluate the company alongside US domestic equities. It is an annual

reporting requirement by the US Securities and Exchange Commission (SEC)

for foreign private issuers with equity shares listed on exchanges in the

United States.

Remuneration report

The remuneration report includes the total remuneration received by each

member of the Board of Directors and the Executive Management of Novo

Nordisk A/S from 2016 to 2020.

Corporate governance report

The corporate governance report discloses Novo Nordisk’s compliance with

Danish Corporate Governance Recommendations to meet the requirements

of the Danish Financial Statements Act.

References

Throughout the management review section in this report, links are provided

to online sources for additional information. Some of the references are not

mandatory and hence not included in the audit of the management review.

For more news from Novo Nordisk, visit

novonordisk.com/investors.html

novonordisk.com/news-and-media/latest-news.html

Credits

Design and production: Kontrapunkt.

Photography: Gustavo Aranda Hernández, Oliver Grenaa, Martin Nordmark.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information Novo Nordisk Annual Report 2020 / 93

Product overview

Diabetes care

New-generation insulin and

combinations

Tresiba

, insulin degludec

Ryzodeg

70/30, insulin degludec/

insulin aspart

Fiasp

, fast-acting insulin aspart

Xultophy

*, insulin degludec/liraglutide

Modern insulin

Levemir

, insulin detemir

NovoRapid

**, insulin aspart

NovoMix

30, biphasic insulin aspart

NovoMix

50, biphasic insulin aspart

NovoMix

70, biphasic insulin aspart

Human insulin

lnsulatard

, isophane (NPH) insulin

Actrapid

, regular human insulin

Mixtard

30, biphasic human insulin

Mixtard

40, biphasic human insulin

Mixtard

50, biphasic human insulin

Glucagon-like peptide-1

Victoza

, liraglutide

Ozempic

, semaglutide

Rybelsus

, oral semaglutide

Diabetes delivery systems

Pre-lled delivery system

FlexTouch

, U100, U200

FlexPen

InnoLet

Ozempic

pen

Ozempic

Single dose device

(approved in Japan)

Durable delivery systems

NovoPen

NovoPen Echo

Other delivery systems

PumpCart

, NovoRapid

and Fiasp

cartridge to be used in pump

Cartridge Vial

Oral antidiabetic agents

NovoNorm

, repaglinide

Glucagon

GlucaGen

, glucagon for diagnostic use

GlucaGen

Hypokit, glucagon

emergency kit for severe hypoglycaemia

Needles

NovoFine

Plus

NovoFine

NovoTwist

NovoFine

AutoCover

Obesity care

Glucagon-like peptide-1

Saxenda

, liraglutide 3 mg

Obesity delivery systems

Saxenda

pen

Biopharm

Haemophilia

NovoSeven

, recombinant factor VIia,

also available with pre-lled syringe in

an increasing number of countries

NovoEight

***, recombinant factor VIII

NovoThirteen

, recombinant factor XIII

Rexia

****, Nonacog beta pegol;

N9/GP Esperoct

, Turoctocog alfa

pegol, NS-GP

Human growth hormone

Norditropin

, somatropin (rDNA origin)

Macrilen, Macimorelin; growth hormone

secretagogue receptor agonist

Human growth hormone delivery system

Pre-lled delivery system

FlexPro

NordiFlex

Nordilet

NordiPen

Durable delivery systems

Durable multi-dose delivery system to be used

with Norditropin

SimpleXx

Other delivery system

PenMate

, automatic needle inserter

(for NordiPen

and NordiFlex

)

Hormone replacement therapy

Vagifem

, estradiol hemihydrate

Activelle

, estradiol/norethisterone acetate

Kliogest

, estradiol/norethisterone acetate

Novofem

, estradiol/norethisterone acetate

Trisequens

, estradiol/norethisterone acetate

Estrofem

, estradiol

* in the US approved under the brand name

Xultophy

100/3.6

** in the US called NovoLog

*** in the US spelt Novoeight

**** in the US approved under the name of REBINYN

2021 nancial calender

3 February 2021

Financial statement for 2020 and Annual Report 2020

25 March 2021

Annual General meeting 2020

26 March 2021

Ex-dividend

29 March 2021

Record date

30 March 2021

Payment, B shares

9 April 2021

Payment, ADRs

5 May 2021

Financial statement for the rst three months of 2021

5 August 2021

Financial statement for the rst six months of 2021

16 August 2021

Ex-dividend

17 August 2021

Record date

18 August 2021

Payment, B shares

25 August 2021

Payment, ADRs

3 November 2021

Financial statement for the rst nine months of 2021

2022 nancial calendar

2 February 2022

Financial statement for 2021 and Annual Report 2021

Headquarters

Novo Nordisk A/S

Novo Allé

2880 Bagsværd

Denmark

Tel +45 4444 8888

CVR number 24 25 67 90

novonordisk.com

Investor Service

We welcome enquiries and feedback

to the Annual Report via

https://www.novonordisk.com/contact-us.html

Shareholders’ enquiries concerning dividend

payments and shareholder accounts should

be addressed to:

investor-relations@novonordisk.com

ADR holders’ enquiries concerning dividend

payments, transfer of ADR certicates,

consolidation of accounts and tracking

of ADRs should be addressed to:

JPMorgan Chase Bank, N.A

Toll free number: Phone: 1 800 990 1135

Outside the U.S.: Phone: +1 651 453 2128

Regular correspondence:

Shareowner Services

P.O. Box 64504

St. Paul, MN 55164-0504

Email: StockTransfer@equiniti.com

Financial statements of the parent company Novo Nordisk Annual Report 2020 / 94

Financial statements of the parent company 2020

Income statement

For the year ended 31 December

DKK million Note 2020 2019

Net sales 2 100,940 93,440

Cost of goods sold 3 20,662 17,940

Gross prot 80,278 75,500

Sales and distribution costs 3 26,673 23,619

Research and development costs 3 14,524 12,858

Administrative costs 3 1,913 1,837

Other operating income, net 1,976 2,204

Operating prot 39,144 39,390

Prot in subsidiaries, net of tax 8 10,394 10,497

Financial income 4 2,144 485

Financial expenses 4 2,238 3,707

Prot before income taxes 49,444 46,665

Income taxes 7,285 7,413

Net prot 42,159 39,252

Balance sheet

At 31 December

DKK million Note 2020 2019

Assets

Intangible assets 6 7,938 3,428

Property, plant and equipment 7 25,322 24,724

Financial assets 8 43,598 33,876

Deferred income tax assets 5 — 95

Other receivables and prepayments 218 239

Total non-current assets 77,076 62,362

Raw materials 2,781 2,357

Work in progress 10,647 9,761

Finished goods 2,246 2,590

Inventories 15,674 14,708

Trade receivables 1,523 1,687

Amounts owed by aliated companies 15,893 14,302

Tax receivables — 295

Other receivables and prepayments 2,353 1,340

Receivables 19,769 17,624

Derivative nancial instruments 9 2,332 188

Cash at bank 11,509 14,067

Total current assets 49,284 46,587

Total assets 126,360 108,949

The following pages comprise the nancial statements of the parent company, the legal entity Novo Nordisk A/S.

Apart from ownership of the subsidiaries in the Novo Nordisk Group, activity within the parent company mainly

comprises sales, research and development, production, corporate activities and support functions.

DKK million Note 2020 2019

Equity and liabilities

Share capital 470 480

Net revaluation reserve according to

the equity method 9,749 15,340

Development costs reserve 959 811

Reserve for cash ow hedge 1,617 (323)

Retained earnings 50,241 41,124

Total equity 63,036 57,432

Borrowings 10 596 715

Deferred income tax liabilities 5 523 —

Other provisions 11 1,348 995

Total non-current liabilities 2,467 1,710

Borrowings 10 6,275 165

Derivative nancial instruments 9 1,365 734

Trade payables 2,910 2,673

Amounts owed to aliated

companies 40,931 40,754

Tax payables 3,114 74

Other liabilities 11 6,262 5,407

Total current liabilities 60,857 49,807

Total liabilities 63,324 51,517

Total equity and liabilities 126,360 108,949

Manuel

Financial statements of the parent company Novo Nordisk Annual Report 2020 / 95

Equity statement

DKK million

capital

Net

revaluation

reserve

Reserve for

cash ow

hedges

Develop-

ment costs

reserve

Retained

earnings 2020 2019

Balance at the beginning of the year 480 15,340 (323) 811 41,124 57,432 51,505

Appropriated from net prot 24,995 24,995 15,377

Appropriated from net prot to net revaluation reserve (3,902) (3,902) 4,224

Exchange rate adjustments of investments in subsidiaries (1,689) (1,689) 226

Eect of cash ow hedges transferred to the income statement 1,940 1,940 1,506

Fair value adjustments of cash ow hedges for the year — (323)

Development costs 148 (148) — —

Other adjustments (179) (179) (155)

Transactions with owners:

Total dividend for the year 21,066 21,066 19,651

Interim dividends paid during the year (7,570) (7,570) (7,100)

Dividends paid for prior year (12,551) (12,551) (12,309)

Reduction of the B share capital (10) 10 — —

Purchase of treasury shares (16,855) (16,855) (15,334)

Share-based payments (note 3) 327 327 148

Tax related to restricted stock units 22 22 16

Balance at the end of the year 470 9,749 1,617 959 50,241 63,036 57,432

Proposed appropriation of net prot:

Interim dividend for the year 7,570 7,100

Final dividend for the year 13,496 12,551

Appropriated to net revaluation reserve (3,902) 4,224

Transferred to retained earnings 24,995 15,377

Distribution of net prot 42,159 39,252

Please refer to note 4.1 in the consolidated nancial statements for

details on the average number of shares, treasury shares and total

number of A and B shares in Novo Nordisk A/S.

Financial statements of the parent company Novo Nordisk Annual Report 2020 / 96

Notes

To the extent that net prot exceeds declared dividends from such

companies, the net revaluation of investments in subsidiaries and associated

companies is transferred to net revaluation reserve under equity according

to the equity method. Prots in subsidiaries and associated companies are

disclosed as prot 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.

Novo Nordisk A/S and its Danish subsidiaries are included in the joint

taxation of the parent company, Novo Holdings A/S.

2 Sales

DKK million 2020 2019

Sales by business segment

Diabetes and Obesity care 100,741 93,192

Biopharm 199 248

Total sales 100,940 93,440

Sales by geographical segment

North America Operations 52,054 50,326

International Operations:

EMEA 25,124 22,941

China 12,554 10,326

Rest of World 11,208 9,847

Total sales 100,940 93,440

Sales are attributed to a geographical segment based on location of the

customer. For denitions of segments, please refer to note 2.2 in the

consolidated nancial statements. Refer to note 5.6 in the consolidated

nancial statements for an overview of companies in the Novo Nordisk

Group based on geographical areas.

3 Employee costs

DKK million 2020 2019

Wages and salaries 11,503 10,668

Share-based payment costs 327 148

Pensions 1,045 1,009

Other social security contributions 176 197

Other employee costs 299 393

Total employee costs in the income

statement 13,350 12,415

Average number of full-time employees 15,782 15,550

Year-end number of full-time employees 16,151 15,442

For information regarding remuneration to the Board of Directors and

Executive Management, please refer to note 2.4 to the consolidated nancial

statements.

4 Financial income and nancial expenses

DKK million 2020 2019

Interest income relating to subsidiaries 263 432

Result of associated company 21 36

Foreign exchange gain (net) 1,751 —

Other nancial income 109 17

Total nancial income 2,144 485

Interest expenses relating to subsidiaries 137 588

Foreign exchange loss (net) — 426

Financial loss from forward contracts (net) 1,777 2,470

Other nancial expenses 324 223

Total nancial expenses 2,238 3,707

1 Accounting policies

The nancial 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 Copenhagen.

The accounting policies for the nancial statements of the parent company

are unchanged from the previous nancial year except for a change of

presentation of equity. The accounting policies are the same as for the

consolidated nancial statements with the adjustments described below.

For a description of the accounting policies of the Group, please refer to the

consolidated nancial statements.

No separate statement of cash ows has been prepared for the parent

company; please refer to the statement of cash ows for the Group.

Change of presentation of equity

The Danish Financial Statements Act has been amended eective from 1

January 2020 to require an equity reserve corresponding to income and

expenses on cash ow hedges recognised in equity ('Reserve for cash ow

hedges'). These transactions have previously been recognised in retained

earnings. The reserve for cash ow hedges is distributable.

The amendment has been implemented retrospectively. The impact at the

beginning of 2019 is recognition of a reserve for cash ow hedges

amounting to DKK (1,506) million and a corresponding increase in retained

earnings. The implementation had no impact on total equity. The movement

in the reserve for 2019 amounted to DKK 1,183 million, resulting in a reserve

of DKK (323) million at the end of 2019.

Supplementary accounting policies for the parent company

Financial assets

In the nancial statements of the parent company, investments in

subsidiaries and associated companies are recorded under the equity

method, using the respective share of the net asset values in subsidiaries

and associated companies. The equity method is used as a measurement

basis rather than a consolidation method. The net prot of subsidiaries and

associated companies less unrealised intra-group prots is recorded in the

income statement of the parent company.

Manuel

enkelte linjer brødtekst

under skema

giv tabeltxt

for bedre afstand

Financial statements of the parent company Novo Nordisk Annual Report 2020 / 97

5 Deferred income tax assets/(liabilities)

DKK million 2020 2019

Net deferred tax asset/(liability) at the beginning

of the year 95 (137)

Income/(charge) to the income statement (18) 460

Income/(charge) to equity (600) (228)

Net deferred tax asset/(liability) at the end of

the year (523) 95

The Danish corporate tax rate was 22% in 2020 (22% in 2019).

6 Intangible assets

DKK million 2020 2019

Cost at the beginning of the year 6,065 4,887

Additions during the year 5,165 1,190

Disposals during the year (153) (12)

Cost at the end of the year 11,077 6,065

Amortisation at the beginning of the year 2,637 2,088

Amortisation during the year 306 271

Impairment losses for the year 349 290

Amortisation and impairment losses reversed

on disposals during the year (153) (12)

Amortisation at the end of the year 3,139 2,637

Carrying amount at the end of the year 7,938 3,428

Intangible assets primarily relate to patents and licences, internally

developed software and costs related to major IT projects.

7 Property, plant and equipment

DKK million

Land and

buildings

Plant and

machinery

Other

equipment

Assets

under

con-

struction 2020 2019

Cost at the beginning of the year 20,757 20,816 3,732 4,240 49,545 47,292

Change of accounting policy for leases — — — — — 1,010

Additions during the year 152 581 123 2,233 3,089 2,021

Disposals during the year (69) (526) (40) (16) (651) (778)

Transfer from/(to) other items 1,254 1,476 198 (2,928) — —

Cost at the end of the year 22,094 22,347 4,013 3,529 51,983 49,545

Depreciation and impairment losses at the beginning of the year 8,352 14,367 2,102 — 24,821 23,151

Depreciation for the year 1,023 1,038 326 — 2,387 2,283

Impairment losses for the year 8 69 4 16 97 164

Depreciation reversed on disposals during the year (69) (520) (39) (16) (644) (777)

Depreciation and impairment losses at the end of the year 9,314 14,954 2,393 — 26,661 24,821

Carrying amount at the end of the year 12,780 7,393 1,620 3,529 25,322 24,724

Of which related to leased property, plant and equipment 709 — 54 — 763 877

Leased property, plant and equipment primarily relates to lease of oce buildings, warehouses, laboratories and vehicles.

Financial statements of the parent company Novo Nordisk Annual Report 2020 / 98

8 Financial assets

DKK million

Invest-

ments in

subsidiaries

Amounts

owed by

aliated

companies

Invest-

ment in

associated

company

Other

securities

and invest-

ments 2020 2019

Cost at the beginning of the year 8,933 8,257 105 1,198 18,493 17,277

Investments during the year 21,816 7,789 24 29,629 5,409

Divestments and repayments during the year (1,575) (11,999) (2) (13,576) (4,193)

Cost at the end of the year 29,174 4,047 105 1,220 34,546 18,493

Value adjustments at the beginning of the year 28,652 267 108 (224) 28,803 28,952

Prot/(loss) before tax 18,187 18,187 16,514

Share of result after tax in associated company 21 21 36

Income taxes on prot for the year (3,748) (3,748) (2,226)

Market value adjustment (171) (171) (187)

Dividends received (16,767) (18) (16,785) (6,320)

Divestments during the year (3) (3) —

Eect of exchange rate adjustment (2,537) (512) (54) (3,103) 450

Other adjustments 2,468 2,468 (215)

Transfer between unrealised internal prot and value adjustment — (8,201)

Value adjustments at the end of the year 26,255 (245) 111 (452) 25,669 28,803

Unrealised internal prot at the beginning of the year (13,420) (13,420) (17,760)

Unrealised internal prot movements in the year (4,045) (4,045) (3,791)

Eect of exchange rate adjustment 848 848 (70)

Transfer between unrealised internal prot and value adjustment — 8,201

Unrealised internal prot at the end of the year (16,617) — — — (16,617) (13,420)

Carrying amount at the end of the year 38,812 3,802 216 768 43,598 33,876

The carrying amount of investments in subsidiaries does not include

capitalised goodwill at the end of the year. For a list of companies in

the Novo Nordisk Group, please refer to note 5.6 to the consolidated

nancial statements.

Financial statements of the parent company Novo Nordisk Annual Report 2020 / 99

9 Derivatives

For information on derivative nancial instruments, please refer to note 4.3

to the consolidated nancial statements.

10 Borrowings

DKK million 2020 2019

Within 1 year 6,275 165

1-5 years 470 523

More than 5 years 126 192

Total borrowings 6,871 880

Borrowings within one year includes a DKK 5,577 million loan. The

remainder of Borrowings are related to lease liabilities.

11 Other provisions

Provisions for pending litigations are recognised as other provisions.

For information on pending litigations, please refer to note 3.6 to the

consolidated nancial statements. Furthermore, as part of normal business

Novo Nordisk issues credit notes for expired goods. Consequently, a

provision for future returns is made, based on historical product return

statistics.

12 Related party transactions

For information on transactions with related parties, please refer to note 5.3

to the consolidated nancial statements.

Transactions with CS Solar Fund XIV disclosed in note 5.3 in the consolidated

nancial statements are not related to the parent company. The parent

company’s share of services provided by NNIT Group amounts to DKK 638

million (DKK 758 million in 2019).

Novo Nordisk A/S is included in the consolidated nancial statements of

Novo Nordisk Foundation.

13 Fee to statutory auditors

DKK million 2020 2019

Statutory audit 8 8

Audit-related services 3 3

Tax advisory services 5 6

Other services 1 3

Total fee to statutory auditors 17 20

14 Commitments and contingencies

DKK million 2020 2019

Commitments

Leases

137 175

Potential milestone payments

6,794 4,464

Guarantees given for subsidiaries 8,490 10,011

Other guarantees 101 130

1. Lease commitments predominantly relate to estimated variable property taxes and low

value assets.

2. Potential milestone payments are associated with uncertainty as they are linked

to successful achievements in research activities; please refer to note 5.2 to the

consolidated nancial statements.

Novo Nordisk A/S and its Danish subsidiaries are jointly taxed with the

Danish companies in Novo Holdings A/S. The joint taxation also covers

withholding taxes in the form of dividend tax, royalty tax and interest tax.

The Danish companies are jointly and severally liable for the joint taxation.

Any subsequent adjustments to income taxes and withholding taxes may

lead to a larger liability. The tax for the individual companies is allocated in

full on the basis of the expected taxable income.

For information on pending litigation and other contingencies, please refer

to notes 3.6 and 5.2 to the consolidated nancial statements.