quarterly investor update – november 2016 › content › dam › denmark › hq...093_share...

shareQUARTERLY INVESTOR UPDATE – NOVEMBER 2016

CHANGING OF THE GUARD: NOVO NORDISK APPOINTS NEW PRESIDENT AND CEO

SEMAGLUTIDE REDUCES MAJOR CARDIOVASCULAR EVENTS BY 26% IN ADULTS WITH TYPE 2 DIABETES AT HIGH CARDIOVASCULAR RISK

NOVO NORDISK LOWERS LONG-TERM OPERATING PROFIT GROWTH TARGET

093_Share magazine_Nov_2016_v5.indd 1 07-11-2016 15:39:07

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Regrettably, intensified competitive pressure in the US has made it necessary to revise our long-term financial targets – and lay off some of our valued employees. However, we are confident that our strong product portfolio with innovative products such as Victoza®, Tresiba® and semaglutide will enable us to deliver on our revised growth targets.

Looking back over the first nine months of 2016, we have seen our sales increase by 6% measured in local currencies and 4% in Danish kroner. This sales growth was realised broadly within both diabetes care and biopharmaceuticals, with the majority of growth coming from Tresiba®, Victoza®, Norditropin® and Saxenda®.

We have had to revise our expectations for 2016, and now expect full-year sales growth to be 5-6% measured in local currencies, while growth in adjusted operating profit is expected to be 5-7%.

Looking ahead to next year, the preliminary outlook for 2017 indicates low single-digit growth in sales and flat to low single digit growth in operating profit, both measured in local currencies.

You may recall that in February this year, the Board of Directors approved an update of the long-term financial targets to guide Novo Nordisk’s performance. However, due to the more challenging competitive environment in the US, the operating profit growth target of 10% is no longer deemed achievable, and Novo Nordisk now expects an average operating profit growth of 5%. The two other long-term financial targets are unchanged.

In September, we announced plans to reduce the workforce by approximately 1,000 employees out of the 42,600 positions in the company’s global organisation. The lay-offs are one of several actions currently being taken to reduce operating costs.

During the third quarter, a number of changes in Novo Nordisk’s executive management were announced – including my impending retirement from the company. After 34 years at Novo Nordisk – the last 16 as CEO – I will be stepping down at the end of this year, with my successor, Lars Fruergaard Jørgensen, executive vice president and current head of Corporate Development, taking over as president and CEO on 1 January 2017.

Lars Rebien Sørensen President and CEO, Novo Nordisk

A QUARTER WITH CHALLENGING DECISIONS


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LARS REBIEN SØRENSEN TO RETIRE AS CEO OF NOVO NORDISK; LARS FRUERGAARD JØRGENSEN APPOINTED AS SUCCESSORLars Rebien Sørensen will retire from his role as president and CEO of Novo Nordisk at the end of 2016, bringing his 34-year career with the company to an end. He will be succeeded by Lars Fruergaard Jørgensen, who has worked for the company since 1991 and currently holds the position of executive vice president and head of Corporate Development.

Commenting on the retirement of Lars Rebien Sørensen, chairman of the Board of Directors Göran Ando said that Lars Rebien Sørensen had been instrumental in the company’s growth and success over the past 16 years.

“Succeeding Lars is a tall order for any candidate,” he said. “I’m sure that anyone who has followed Novo Nordisk under Lars’s leadership will agree that he’s been instrumental in achieving remarkable growth and respect for the company during his 16 years as CEO and 34 years here in total. We can’t thank him enough for what he’s done for Novo Nordisk.”

Göran added that the Board’s decision to appoint Lars Fruergaard Jørgensen as Lars Rebien Sørensen’s successor had been unanimous, describing the new CEO as a “strategist, problem solver and great people leader”.

“He personifies the Novo Nordisk Way in every conceivable manner,” he explained. “Ask anybody in the organisation and they’ll tell you he’s ambitious, accountable, respectful, open and honest, and always keeps in mind what’s best for patients, our employees and our shareholders in the long run.”

Reflecting on his new position, Lars Fruergaard Sørensen said he was excited about the road ahead – despite the challenges facing the company.

“On the one hand, Novo Nordisk has never had a stronger portfolio and organisation, but on the other we’re facing an unprecedented level of payer pressure and competition,” he said. “But I love challenges, and therefore I can’t think of a more exciting time to be offered the job of CEO of Novo Nordisk – a company I’ve served for more than 25 years and am really passionate about.

“As with all good enterprises, there is a constant need to adjust, fine-tune and make things better, and I’m sure that all my colleagues and I can make Novo Nordisk an even stronger company than the one we’ve built over the past 16 years under the outstanding leadership of Lars Rebien Sørensen.”

Lars Fruergaard Jørgensen will take over as president and CEO on 1 January 2017


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Sales increased by 6% in local currencies and by 4% in Danish kroner to DKK 82.2 billion. - Sales of Tresiba® increased by 187% (184% in Danish kroner). - Sales of Victoza® increased by 13% (12% in Danish kroner). - Sales of Saxenda® was DKK 1.0 billion. - Sales in the US increased by 6% (5% in Danish kroner). - Sales in International Operations increased by 13% (unchanged in Danish kroner). - Sales in Region China increased by 11% (5% in Danish kroner).

Operating profit decreased by 1% reported in local currencies and by 3% in Danish kroner to DKK 37.2 billion. Adjusted for the non-recurring income related to the partial divestment of NNIT and the income related to out-licensing of assets for inflammatory disorders, both in 2015, operating profit in local currencies increased by 7%.

Net profit increased by 10% to DKK 29.2 billion. Diluted earnings per share increased by 12% to DKK 11.50. Adjusted for the partial divestment of NNIT, net profit and diluted earnings per share increased by 20% and 22% respectively.

In September, Novo Nordisk announced that Lars Rebien Sørensen, president and chief executive officer, will retire from the company by the end of 2016. Lars Fruergaard Jørgensen, currently executive vice president and head of Corporate Development, will succeed him, effective 1 January 2017.

In September, Novo Nordisk announced plans to reduce the workforce by approximately 1,000 employees out of the 42,600 positions in the company’s global organisation.

For 2016, the range for sales growth is still expected to be 5–6%, and growth in adjusted operating profit is still expected to be 5–7%, both measured in local currencies.

During 2016, the market environment in the USA has become significantly more challenging, negatively impacting future pricing for Novo Nordisk’s products. Consequently, the preliminary outlook for 2017 in local currencies indicates low single-digit growth in sales and flat to low single-digit growth in operating profit. Furthermore, Novo Nordisk no longer deems it achievable to reach the operating profit growth target of 10%, set in February 2016. As a result, the target has been revised and Novo Nordisk is now aiming for an average operating profit growth of 5%. The two other long-term financial targets remain unchanged.

Read more in the company announcement from 28 October at novonordisk.com/media.

Novo Nordisk increased adjusted operating profit by 7% in local currencies in the first nine months of 2016. Sales increased by 6% in local currencies.

HIGHLIGHTS FROM THE FIRST NINE MONTHS OF 2016

6%TOTAL DIABETES AND OBESITY CARE SALES GREW BY

6%TOTAL BIOPHARMA-CEUTICALS SALES INCREASED BY

10%NET PROFIT INCREASED BY

(local currencies)

(local currencies)

(local currencies)

(Danish kroner)

7%ADJUSTED OPERATING PROFIT INCREASED BY


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New-generation insulin salesDKK billion

Victoza® salesDKK billion

Biopharmaceutical salesDKK billion

Diabetes and obesity care salesDKK billion

Modern insulin salesDKK billion

9M2014

9M2015

9M2016

9M2014

9M2014

9M2014

9M2014

9M2014

9M2015

9M2015

9M2015

9M2015

9M2015

9M2016

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9M2016

9M2016

9M2016

Total sales DKK billion


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KEY FIGURES FOR THE FIRST NINE MONTHS OF 2016Amounts in DKK million, except number of shares, earnings per share and full-time equivalent employees. 9M 2016 9M 2015 % change 9M 2015

INCOME STATEMENT to 9M 2016 Net sales 82,208 79,051 4% Gross profit 69,943 67,471 4%Gross margin 85.1% 85.4%

Sales and distribution costs 20,468 20,273 1%Percent of sales 24.9% 25.6%

Research and development costs 10,093 9,574 5%Percent of sales 12.3% 12.1%

Administrative costs 2,796 2,693 4% Percent of sales 3.4% 3.4%

Other operating income, net 640 3,388 N/ANon-recurring income from the initial public offering of NNIT A/S - 2,376 N/A

Operating profit 37,226 38,319 (3%)Operating margin 45.3% 48.5%

Net financials (370) (5,150) (93%)

Profit before income taxes 36,856 33,169 11%

Income taxes 7,630 6,567 16% Effective tax rate 20.7% 19.8%

Net profit 29,226 26,602 10% Net profit margin 35.6% 33.7%

OTHER KEY NUMBERS

Depreciation, amortisation and impairment losses 2,077 1,944 7% Capital expenditure (tangible assets) 4,559 3,028 51%

Net cash generated from operating activities 37,161 28,168 32% Free cash flow 31,603 27,280 16%

Total assets 87,340 85,195 3% Equity 41,327 43,109 (4%)Equity ratio 47.3% 50.6%

Average number of shares outstanding, diluted (million) 2,540.6 2,586.7 (2%)Diluted earnings per share/ADR (in DKK) 11.50 10.28 12%Diluted earnings per share/ADR adjusted for non-recurring income from NNIT IPO (in DKK) 11.50 9.40 22%

Full-time equivalent employees end of period 42,605 40,261 6%


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27%

FORWARD-LOOKING STATEMENTS

This document contains a summary of information made by Novo Nordisk in connection with the issuing of our company announcement number 74/2016 dated 28 October 2016. The company announcement contains forward-looking statements with respect to the business, objectives and plans of Novo Nordisk and its current goals, and expectations relating to its future economic performance. These statements are based on current plans, estimates and projections. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific. Novo Nordisk cautions that a number of important factors, including those described in this document, could cause actual results to differ materially from those contemplated in any forward-looking statements. Factors that may affect future results include, but are not limited to, global as well as local political and economic conditions, including interest rate and currency exchange rate fluctuations, delay or failure of projects related to research and/or development, unplanned loss of patents, interruptions of supplies and production, product recalls, unexpected contract breaches or terminations, government-mandated or market-driven price decreases for Novo Nordisk’s products, introduction of competing products, reliance on information technology, Novo Nordisk’s ability to successfully market current and new products, exposure to product liability and legal proceedings and investigations, changes in governmental laws and related interpretation thereof, including on reimbursement, intellectual property protection and regulatory controls on testing, approval, manufacturing and marketing, perceived or actual failure to adhere to ethical marketing practices, investments in and divestitures of domestic and foreign companies, unexpected growth in costs and expenses, failure to recruit and retain the right employees, and failure to maintain a culture of compliance.

Please also refer to the overview of risk factors in ‘Managing risks’ on pages 42–43 of Annual Report 2015, available at novonordisk.com, and Novo Nordisk’s Form 20-F filed with the US Securities and Exchange Commission for examples of forward-looking statements and a discussion of certain factors which could cause actual results to differ materially from those contemplated in any forward-looking statements.

The forward-looking statements contained in this document are made as of the date of the above- mentioned company announcement and, unless required by law, Novo Nordisk is under no duty and undertakes no obligation to update or revise any forward-looking statement after the distribution of the company announcement, whether as a result of new information, future events or otherwise.

26.8

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MILLION PEOPLEUSE OUR DIABETES CARE PRODUCTS

COUNTRIES

OUR PRODUCTS ARE MARKETED IN OVER

NOVO NORDISK’S SHARE OF THE GLOBAL DIABETES MARKET MEASURED IN VALUE:


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In September, Novo Nordisk announced plans to reduce its global workforce by approximately 1,000 employees out of the 42,600 positions currently held across the company’s global organisation.

The redundancies are one of several actions currently being taken to reduce operating costs as the company faces a challenging competitive environment in 2017, especially in the US market, which accounts for around 50% of Novo Nordisk’s sales.

“The organisation is working hard to contain costs, but the reality is that salaries are the largest cost we have,” explains Lars Fruergaard Jørgensen, who will take over as CEO on 1 January 2017. “So when we have to adjust our cost base, we can’t avoid also looking at the number of employees we have in the company.”

The reductions are expected to affect R&D units and staff functions at headquarters as well as positions across the global commercial organisation. Around 500 of the layoffs are expected to be in Denmark.

“We deeply regret that good colleagues stand to lose their jobs, and it’s been a difficult decision to make,” says President and CEO Lars Rebien Sørensen. ”However, we have concluded that it’s needed in order for us to have a sustainable balance between income and costs. In the current situation, we have to prioritise investments in key product launches that will bring innovation to patients and drive our future growth.”

NOVO NORDISK ANNOUNCES PLANS TO REDUCE WORKFORCE BY APPROXIMATELY 1,000 EMPLOYEES


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SEMAGLUTIDE REDUCES MAJOR CARDIOVASCULAR EVENTS BY 26% IN ADULTS WITH TYPE 2 DIABETES AT HIGH CARDIOVASCULAR RISKIn September, at the annual European Association for the Study of Diabetes (EASD) conference in Munich, detailed results from the SUSTAIN 6 trial were presented. The results were also published in the New England Journal of Medicine.

The data showed that semaglutide, a once-weekly GLP-1, reduced the risk of the primary composite endpoint of time to first occurrence of either cardiovascular (CV) death, non-fatal myocardial infarction (heart attack) or non-fatal stroke by 26% vs placebo, when added to standard of care in 3,297 adults with type 2 diabetes at high CV risk. The improvement was driven by all three components. These results were based on an accumulation of 254 major adverse cardiovascular events.

“The results of SUSTAIN 6 support the strong potential of once-weekly semaglutide in type 2 diabetes treatment, and we look forward to regulatory submission later this year,” says Mads Krogsgaard Thomsen, executive vice president and chief science officer of Novo Nordisk.

In terms of microvascular complications, significantly fewer people treated with

semaglutide vs placebo had new onset or worsening nephropathy, while significantly more people treated with semaglutide vs placebo experienced diabetic retinopathy complications.

“The reduction in cardiovascular events observed with semaglutide in SUSTAIN 6 is notable given the small study population and the short trial duration,” says Dr Steven Marso, SUSTAIN 6 investigator and the lead author for The New England Journal of Medicine publication of SUSTAIN 6. “These findings are clinically relevant, as cardiovascular disease is the leading cause of death in people with type 2 diabetes, and new treatment options that can also reduce the risk of cardiovascular events are needed.”

Semaglutide is a once-weekly investigational analogue of human glucagon-like peptide-1 (GLP-1) that stimulates insulin and suppresses glucagon secretion in a glucose-dependent manner, while decreasing appetite and food intake.

1. Fowler M. Clinical Diabetes. 2008;26(2):77–82. 2. Almdal T, et al. Arch Intern Med. 2004;164(13):1422–6. 3. IDF Diabetes Atlas 7th edition. 2015. Available at: http://www.diabetesatlas.org/. Last accessed August 2016.

CARDIOVASCULAR DISEASE REMAINS A KEY CHALLENGE IN PEOPLE WITH TYPE 2 DIABETES:

• Cardiovascular disease is a leading cause of death for people with type 2 diabetes.

• People with type 2 diabetes are 2–4 times more likely to have CVD.1,2

• CVD accounts for 50% or more of diabetes-related deaths.3

ABOUT SEMAGLUTIDE


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In September, the FDA informed Novo Nordisk that it had extended the regulatory review period for IDegLira, Novo Nordisk’s fixed-ratio combination of insulin degludec and liraglutide for adults with type 2 diabetes, by three months.

Reacting to the FDA’s decision, Jakob Riis, the newly appointed executive vice president of North America

Operations, said: “I remain optimistic that we’ll see an approval in the US within the next few months. Once approved, Xultophy® will complement our already strong portfolio in the US market.”

Novo Nordisk submitted the NDA to the FDA in September 2015 and, with the extension of the review, the action date is now expected in December 2016.

FDA EXTENDS REGULATORY REVIEW PERIOD FOR IDEGLIRA

In September, Novo Nordisk received a complete response letter from the US Food and Drug Administration (FDA) regarding the New Drug Application (NDA) for faster-acting insulin aspart.

In the letter, the FDA requests additional information related to the analysis of the immunogenicity and clinical pharmacology data before the review of the NDA can be completed. Novo Nordisk is evaluating the content of the complete response letter and

will work closely with the FDA to resolve the outstanding issues.

”We believe faster-acting insulin aspart can address an unmet medical need for people requiring improved blood glucose control around meals, and our ambitions for this innovative drug are unchanged,” says Mads Krogsgaard Thomsen, executive vice president and chief science officer of Novo Nordisk.

”We acknowledge the request for information from the FDA and will work closely with the agency to determine the best path forward to complete the review.”

The NDA for faster-acting insulin aspart was submitted to the FDA in December 2015. Faster-acting insulin aspart is currently also under review in the EU, Switzerland, Canada, Brazil, South Africa and Argentina.

NOVO NORDISK RECEIVES COMPLETE RESPONSE LETTER IN THE US FOR FASTER-ACTING INSULIN ASPART


11The LEADER trial showed that Victoza® led to a statistically significant reduction in major adverse cardiovascular events in people with type 2 diabetes

NOVO NORDISK SUBMITS APPLICATION TO REGULATORY AUTHORITIES TO INCLUDE LEADER DATA IN VICTOZA® LABEL

In late October, Novo Nordisk submitted a supplemental application to the US FDA and the European Medicines Agency (EMA) to include data from the LEADER cardiovascular outcomes trial in the Victoza® (liraglutide) label.

At the American Diabetes Association congress in June of this year, it was announced that the LEADER trial had shown that Victoza® reduced the risk of cardiovascular death, non-fatal myocardial infarction (heart attack) or non-fatal stroke by a statistically significant 13% versus placebo, when added to standard of care.

The safety profile of Victoza® in LEADER was generally consistent with previous liraglutide clinical trials.

“Reducing the risk of cardiovascular death in people with type 2 diabetes remains a significant challenge and it’s promising that we now have the opportunity to help address this challenge,” said Mads Krogsgaard Thomsen. “Victoza® is the first GLP-1 receptor agonist to show cardiovascular risk reduction in adults with type 2 diabetes at high cardiovascular risk, and we look forward to working with the regulatory authorities as they review the data from the LEADER trial.”

Novo Nordisk has submitted a supplemental application to the US Food and Drug Administration (FDA) for including data from the two SWITCH phase 3b trials in the label for Tresiba®. The approval of the label update in the US is expected in the second half of 2017.

The two studies, SWITCH 1 and SWITCH 2, were initiated in January 2014 to compare the safety profile and efficacy of Tresiba®, Novo Nordisk’s once-daily basal insulin, with insulin glargine – marketed by Sanofi as Lantus®.

The results from the SWITCH 1 trial (people with type 1 diabetes) showed that in the maintenance period, people treated with Tresiba® had, on average, 11% fewer episodes of overall symptomatic blood glucose-confirmed hypoglycaemia, 36% fewer episodes of nocturnal blood glucose-confirmed symptomatic hypoglycaemia and 35% fewer episodes of severe hypoglycaemia.

The results from the SWITCH 2 trial (people with type 2 diabetes) showed that in the maintenance period, people treated with Tresiba® had, on average, 30% fewer episodes of overall blood glucose-confirmed symptomatic hypoglycaemia and 42% fewer episodes of nocturnal blood glucose-confirmed symptomatic hypoglycaemia.

NOVO NORDISK SEEKS TRESIBA® LABEL UPDATE IN THE US IN WAKE OF SWITCH TRIALS


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Novo Nordisk A/SCorporate Communications, Novo Allé, 2880 Bagsværd, Tel +45 4444 8888 Share Magazineis distributed three times a year to share holders Editorial staff Chris MossTel +45 4443 5677, cms@novo nordisk. com Editor-in-chiefMike Rulis Investor contact Hanna ÖgrenTel +45 3079 8519, [email protected] names Not all products mentioned in Share have been introduced worldwide. Trade names may vary from country to country. Translation, copy-editing and layoutCorporate CommunicationsPrinting and distribution Bording A/S, CopenhagenCirculation 12,000 Danish 2,000 English

Photos Novo Nordisk

Price development and monthly turnover of Novo Nordisk B shares

Turnover of B shares (left) Novo Nordisk’s B share closing prices (right)

DKK Billion

Share price performanceNovo Nordisk share price and indexed peers

Novo Nordisk Pharmaceutical industry peers*OMXC20 CAP

Novo Nordisk share price and indexed peers


Novo Nordisk share price and indexed peers


DKK

2015 2016* Pharma peers comprise AstraZeneca, Bistrol-Myers Squibb, Eli Lilly, GlaxoSmithKline,

Lundbeck, Merck, Novartis, Pfizer, Roche and Sanofi.

of Novo Nordisk B sharesTurnover of B shares (left) Novo Nordisk’s B share

of Novo Nordisk B sharesTurnover of B shares (left) Novo Nordisk’s B share

closing prices (right)

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2015 2016

Oct SepAugMay Jun Jul

2 February 2017 23 March 2017 3 May 2017

FULL YEAR 2016 ANNUAL GENERAL MEETING

FIRST THREE MONTHS OF 2017


quarterly investor update – november 2016 › content › dam › denmark › hq...093_share...

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