healthcare company, you have a commitment to improve health-care, regardless of where the incentive comes from. And if a solution involves changing the environment rather than producing a drug, a healthcare company should endorse that because it makes people healthier and that’s why they’re in this business.”

Providing the right incentives
Both industry and government have incentives to take up prevention as a business model, says Professor Bell. With rising healthcare costs attributed to treating chronic diseases like diabetes and its complications, governments have an economic incentive to focus on prevention, as well as an obligation to improve people’s quality of life, he says.
     “Of course, in the end it is up to individuals to make choices but, the question is, how can government, industry and other partners in society help to make the healthy choices the easy choices?” asks Professor Bell.
     “Government can offer economic incentives for business and individuals to make healthier choices. In many countries, the un-healthiest food choices are also the cheapest and most widely available, whereas fresh fruits and vegetables are often more expensive. Cities and towns can be planned in a way that allows for more green spaces and more bike paths,” says Professor Bell.

Getting kids to listen
That is a message that needs to be driven home to the generation which will most benefit from a successful prevention movement today: children and youth.
     “If you really want to make an impact on society’s health, you need to focus your attention on the future generation. You have to make the investment in good health as a child and teenager. If your health is already deteriorating at age 50, it is very hard to turn it around. People will give up their wealth and their fortune once they’ve had a heart attack if only they were able to restore a little bit of their health,” says Mr Rebien Sørensen.
It is a warning that came across loud and clear to the group of young people who attended the Oxford Vision 2020 Summit in Oxford in September 2004. Members of Kikass, a youth charity group based in the UK, told the summit participants that kids need a movement like Oxford Vision 2020 – but it has to speak in their language.
     “Don’t tell us that 400 million people will die from diabetes in 2020. Tell us that one in 10 of our friends will die an early death from this terrible disease,” says Sarah Jarman, a student at the Surrey Institute of Art and Design. “We’re a generation that’s willing to take a responsible approach to our lifestyle choices but there has to be a reputable and trustworthy source of information,” adds Mark Harris, a student at Oxford University.
     So, can diabetes really be defeated? “It is entirely possible,” says Mr Rebien Sørensen, “but it won’t be through science alone. I don’t think we can solve our societal problems with a pill. It’s going to take more than that. Getting the word out about these risk factors for type 2 diabetes has to start with young people. That is how we will really make progress towards defeating diabetes over the next 20 years.” *

An employee receives encouragement from a fitness instructor at Novo Nordisk’s leisure centre in Bagsværd, Denmark.

Putting prevention into practice

Awareness is the key to prevention. Novo Nordisk has long had a business approach that focuses not only on selling its products and devices, but also on educating people about diabetes. Education efforts, in both the developed and developing world, are aimed at healthcare professionals, people with diabetes and the general public. Examples include:

	In India, diabetes awareness exhibitions sponsored by Novo Nordisk attracted 318,000 people in 2004.
	In China, Novo Nordisk and the Chinese Ministry of Health have launched a project to bring extensive diabetes education throughout China.
	Novo Nordisk also has programmes in sub-Saharan Africa to educate doctors and nurses as well as people with diabetes (see page 28).
	The landmark study about the psychosocial aspects of diabetes, called DAWN, sponsored by Novo Nordisk (see page 14), has prompted a series of educational activities around the world in partnership with other organisations.

Knowing what it does about the risk factors for diabetes, Novo Nordisk has also turned its attention to its own employees with a prevention programme aimed at improving employees’ health, called NovoSund. It was launched in Denmark in 2004, where 59% of the company’s employees are based, but will go global. The programme offers company-sponsored stop-smoking courses and campaigns to promote more exercise and better nutrition, such as healthier canteen food, company-sponsored sports activities or ways to reduce stress. In a pilot programme at one of the company’s facilities in Denmark, employees can test their risk factors for diabetes and other chronic diseases, and consult with a healthcare provider on how to make healthy changes in their lives.
     Novo Nordisk is also conducting a baseline study of the health status of its employees in Denmark. The status will be monitored over a period of years and the results made available to those who may be interested in efforts to improve health in the workplace.
     By creating a culture and working environment supportive of healthy lifestyles, the idea is to put prevention into practice.

DIABETES PREVENTION

Scientists around the world are working hard to defeat diabetes, but a cure has proven elusive. Still, there are encouraging signs of progress. Meanwhile, advanced treatment makes it easier for people to cope with diabetes today.

The search
for a cure

David Matthews is a relentless optimist. He concedes that after more than 30 years of research, a cure for diabetes is still not a reality. But he also points out that the scientific community is closer than ever to its goal – or at least some approximation of a cure for diabetes by 2015. David Matthews should know. As professor at Oxford University and the head of the Oxford Centre for Diabetes, Endocrinology and Metabolism (OCDEM), he is at the centre of the strides being made in the field of diabetes in the last decade.
     “I believe we can look at diabetes the same way we look at cancer. In other words, as a disease that breaks out but can be sent into remission, a stage without symptoms. If you consider type 2 diabetes like that, how would you define a cure? I would say a treat-

Stem cell research has raised hopes for a future treatment for people with type1 diabetes, using cell transplantation. Novo Nordisk’s research activities in this area have to date concentrated on mouse embryonic stem cells.

The company actively participated in the scientific, public and political processes leading up to the revised Danish laws Komitéloven and Patientretsstillings-loven and the EU Cells and Tissue Directive. Novo Nordisk’s Bioethics Policy can be found at novonordisk.com/annual-report-2004

first diabetes centre in Europe to combine basic and clinical research with patient care and medical training, all under one roof. Novo Nordisk’s investment amounts to 4 million British pounds. OCDEM is heading up a project within the European Union to look for biomarkers for diabetes: molecules in the body that can reveal how far developed the disease is for the individual patient and provide guidelines for optimal treatment.

Promise of stem cells
     For type 1 diabetes, the search for a cure revolves around being able to transplant islet cells from the pancreas into a person with diabetes. Islet cells contain the beta cells that regulate the blood sugar level. Currently, this type of transplantation can only be done on a limited scale and with limited success, through donor pancreases. People who undergo transplantation also need to take immunosuppressant drugs, which can have serious side effects. This is because type 1 diabetes is a chronic autoimmune disease, in which the immune system attacks and destroys the beta cells.
     However, advancements in stem cell research hold the promise of creating a safe, stable and widely available source of insulin-secreting cells for transplantation. Stem cells are ‘blank’ cells with the ability to grow into any other type of cell, such as islets.
     Novo Nordisk is at the forefront of stem cell research. The Hagedorn Research Institute, an independent basic research component of Novo Nordisk, is the only industrial partner in both the National Institutes of Health-supported Beta Cell Biology Consortium and the Juvenile Diabetes Research Foundation Centre for Beta Cell Therapy in Europe. The company is currently investing 17 million Danish kroner in stem cell research at Hagedorn.
     Meanwhile, scientists are pursuing many other clues, such as the use of genetics to point the way to new biological molecules that serve as targets for drugs; biomarkers, to identify the biological signs of impending diabetes or its complications; or an artificial pancreas, a medical device that would register blood glucose levels and in response deliver the right amount of insulin.

Facing today’s challenges
“When and if a cure becomes reality, Novo Nordisk will have a strong presence. But meanwhile the estimated 194 million people with diabetes need the best possible treatment today to control their disease and avoid serious complications, such as blindness, nerve damage, kidney failure, heart disease and stroke, and treatment-related hypo-glycaemia (low blood sugar),” says Mads Krogsgaard Thomsen, chief science officer of Novo Nordisk.
     “While it is our vision to defeat diabetes, in reality we don’t know if we will ever get there. But it is important to do everything we can

for the millions of people living with diabetes,” says Dr Krogsgaard Thomsen.
     That is why Novo Nordisk has developed the broadest and most comprehensive diabetes portfolio on the market. “There is no one-size-fits-all diabetes management,” says Dr Krogsgaard Thomsen.
     Today’s insulin therapy strives to mimic the body’s exquisitely precise regulation of blood glucose by insulin-producing pancreatic beta cells. When these cells are missing, as they are in type 1 diabetes, or depleted, as in type 2 diabetes, insulin analogues can provide the next-best alternative to Mother Nature.
     These are designer insulins, which via chemical or protein engineering take on a different action profile and hence mimic insulin physiologically in the body.

Better control, healthier lives
There has been a great evolution in the development of insulin analogues in the past decade. The research into new and better insulin therapy was accelerated by the findings of two landmark studies, the Diabetes Control and Complications Trial (DCCT), which studied type 1 diabetes, and the UK Prospective Diabetes Study (UKPDS), which examined type 2 diabetes.
     Both studies found that while intensive control of diabetes helped reduce complications by as much as 50%, it heightened the risk of hypo-glycaemia, which is serious and even life-threatening, and caused weight gain, which for people with type 2 diabetes is already a contributing factor to their disease.
     In 2004, Novo Nordisk added Levemir^® to its portfolio, the only insulin product in the world, says Dr Krogsgaard Thomsen, that doesn’t make you put on weight, and offers predictability in regulating blood sugar. Also the GLP-1 analogue under development, liraglutide, has proved in clinical trials so far to produce less or no hypo-glycaemia, since it is glucose-dependent, and to help people manage their weight.
     While numerous studies have shown that people with type 2 diabetes often benefit in terms of better control and reduced complications by starting insulin therapy earlier, resistance to insulin therapy can be strong, due to worries and fears over injection, as uncovered by the Novo Nordisk study Diabetes Attitudes, Wishes and Needs (DAWN) (see page 14). For such people, AERx^® insulin Diabetes Management System, now undergoing clinical trials by Novo Nordisk, could be a motivating factor to start insulin therapy, as insulin could be administered by inhalation.
     “We believe that leadership is responding to patients’ needs, whether it is for a more innovative range of insulins or more convenient devices,” says Dr Krogsgaard Thomsen. “At the same time, if we are serious about fulfilling our vision of defeating diabetes, then we must be present in the future when a cure moves closer to reality. This is why we take a holistic approach to diabetes care. The answers aren’t simple but they are within reach.” *

This commitment to sustainable development is anchored in the Novo Nordisk Way of Management. The company is a world leader in diabetes care and has the broadest diabetes product portfolio in the industry, including the most advanced products within the area of insulin delivery systems. In addition, Novo Nordisk has leading positions within areas such as haemostasis management, growth hormone therapy and hormone replacement therapy. Novo Nordisk manufactures and markets pharmaceutical products and services that make a difference to patients, the medical profession and society.
     With headquarters in Denmark, Novo Nordisk has 20,725 employees, operates in 78 countries and markets its products in 179 countries.

Vision

Novo Nordisk’s Vision sets the company’s direction for the future. It expresses what Novo Nordisk strives for, how the company will work, and how it is guided by its values as it endeavours to find the right balance between compassion and competitiveness. The Vision is part of the Novo Nordisk Way of Management. This management approach ensures that the company, in pursuit of its strategic objectives, links financial, environmental, social and bioethical considerations for the long-term benefit of its stakeholders. For more information, visit novonordisk.com/about_us

Novo Nordisk’s Vision:

	We will be the world’s leading diabetes care company. Our aspiration is to defeat diabetes by finding better methods of diabetes prevention, detection and treatment. We will work actively to promote collaboration between all parties in the healthcare system in order to achieve our common goals.
	We will offer products and services in other areas where we can make a difference. Our research will lead to the discovery of new, innovative products, also outside diabetes. We will develop and market such products ourselves whenever we can do it as well as, or better than, others.
	We will achieve competitive business results. Our focus is our strength. We will stay independent, and form alliances whenever they serve our business purpose and the cause we stand for.
	A job here is never just a job. We are committed to being there for our customers whenever they need us. We will be innovative and effective in everything we do. We will attract and retain the best people by making our company a challenging place to work.
	Our values are expressed in all our actions. Decency is what counts. Every day we strive to find the right balance between compassion and competitiveness, the short and the long term, self and commitment to colleagues and society, work and family life.

Ownership structure
Novo Nordisk’s ownership is split between holders of A and B shares. A shares are held by Novo A/S, the holding company, fully owned by the Novo Nordisk Foundation and established in 1999 to manage the Foundation’s assets and to actively invest in life science businesses. The Novo Nordisk Foundation is a privately owned self-governing institution. Its objectives are to provide a stable basis for the commercial and research activities undertaken by the companies in the Novo Group and to support scientific, humanitarian and social purposes. The majority of its grants go to medical and scientific projects. *

ment of diabetes. In 1925 two former employees, the brothers Harald and Thorvald Pedersen, formed a competing insulin company, Novo Terapeutisk Laboratorium (Novo Therapeutic Laboratory). In 1989, the two Danish companies joined forces to become Novo Nordisk A/S.

The Novo Nordisk Way of Management

The Novo Nordisk Way of Management is the framework for how the company does business. Internally, as well as to external stakeholders, this governance framework defines the commitments and puts them into context.
     The Novo Nordisk Way of Management explicitly refers to the Triple Bottom Line (TBL) – social, environmental and financial responsibility – as the company’s underlying business principle. In order to serve the long-term interest of the shareholders, in March 2004 Novo Nordisk amended its Articles of Association to specify that the company will ‘strive to conduct its activities in a financially, environmentally and socially responsible way’. For more information, see page 49.
     To ensure performance to the highest standards, whether they are legal or ethical, global or company-specific, the Novo Nordisk Way of Management has built-in follow-up methods that seek to ensure systematic and validated documentation of performance to the company’s values-based management system:

	The Balanced Scorecard is employed as the management tool for embedding and cascading corporate goals throughout the organisation. The Balanced Scorecard outlines the key priorities for Novo Nordisk in a short-term perspective.
	The annual reporting accounts for performance against targets, strategies, activities, risk profile and new targets.
	Facilitations, undertaken by Novo A/S, measure Novo Nordisk’s governance performance at unit level, facilitate organisational learning and help align projects with business targets. The facilitators are a global team of people with long-standing managerial experience and expertise in the business. They evaluate how well the practices and understanding of the Novo Nordisk Way of Management, including the company’s commitment to the Triple Bottom Line, are embedded in the organisation. This involves review of documentation, interviews with management and employees, sometimes also external stakeholders, and analyses of relevant business processes.

For further information about the Novo Nordisk Way of Management, including the full list of Fundamentals, please visit novonordisk.com

Back to Contents

will provide new treatment options for the growing number of people with type 2 diabetes who fail to achieve satisfactory blood glucose regulation by traditional blood glucose-lowering tablets. And there are the opportunities for long-term growth inherent in new indications for NovoSeven^®, including its use for people undergoing cardiac surgery and those with traumatic brain injury.

What are your key markets now and in the future, and why?
Currently Europe is our biggest market and, with our full insulin analogue portfolio, we expect to see healthy growth in this market. As the world’s biggest pharmaceutical market, the US is a key market for us. We started to penetrate the US insulin and growth hormone markets a few years ago and are now significantly increasing our market share. The US has a large and growing population of people with diabetes, many of whom would benefit greatly from improved blood glucose control to avoid the complications associated with diabetes. The US is also the biggest market for the current and future uses of NovoSeven^®. Then again, we are seeing encouraging growth in key markets in our International Operations due to the increasing number of people being treated for diabetes. Right now half of the company’s total diabetes care production is for countries in these markets, namely China, India, Korea, Turkey, Taiwan, Brazil, Mexico, Egypt, Thailand and Argentina. In Europe and Japan, more moderate growth is expected, hampered by healthcare reforms that are becoming increasingly common as governments face pressure to contain healthcare costs. This limits our ability to negotiate prices that cover the cost of innovation. The sales growth in the US, however, offsets more modest growth in Europe.

What is the future strategy for diabetes care and will Novo Nordisk become a major player in oral products?
We will remain strongly focused on insulin and other protein therapeutics which are our core competences. Within diabetes, our strategy is not simply to deliver superior products and devices but also to provide the services and education that make us the preferred partner in diabetes care. As for oral products, we want to fulfil unmet needs rather than make incremental improvements in what is already available. Therefore, within oral antidiabetic research, we will only focus on projects where we have a clear edge. This contributed to our decision in 2004 to terminate the balaglitazone oral antidiabetic project, since the preclinical results did not suggest a sufficient competitive advantage for balaglitazone, compared to similar, marketed products within this therapeutic category.

You have four therapy areas, but you only mention two of them as business drivers. What about growth hormone therapy and HRT? What is your strategy for these areas?
We’ve seen nice growth in growth hormone this year, thanks in part to our strategy of providing superior delivery systems for the company’s liquid growth hormone Norditropin^® SimpleXx^®. This product has particularly taken off in the US market, where the first disposable human growth hormone pen, NordiFlex^®, received US Food & Drug Administration (FDA) approval in 2004 for long-term treatment of children. The market for hormone replacement therapy (HRT) has been contracting due to negative media. But we still believe that HRT fills an important medical need for women with ser-

Kåre Schultz, chief operating officer of Novo Nordisk.

ious menopausal symptoms, and our product line is well suited to treatment recommendations for lowest possible dose.

You have been investing in several new production facilities this year, most of which are outside Denmark. Can you outline the strategy behind these investments?
Increased activities outside Denmark give us a more competitive cost base and a more balanced exposure to risks such as currency fluctuations. We also gain a strong presence in key markets, such as the US, Brazil and China – globalisation of production will be a continuing focus of our future growth strategy. Internationalisation of our manufacturing capacity enables us to stay cost-competitive and offers us a favourable position in key segments and markets. But Denmark will most likely continue to be an important ‘engine room’ of growth, where we can undertake productivity improvement measures, using facilities in Denmark as ‘labs’ for upscaling and fine-tuning production. The learnings can then be applied around the world.

In October, when your American affiliate reached 1 billion dollar sales, the president of the affiliate stated that the success you have enjoyed in the US is due to your Triple Bottom Line (TBL) approach. How is that?
First you need the right products and the right strategy and organisation. When you have these things, the TBL approach is important. We have been in the business of diabetes care for more than 80 years. For Novo Nordisk, diabetes is both a business and a passion. We want to do more to improve diabetes care in the US than simply provide products. By offering services and education for people with diabetes and the healthcare professionals who treat them, we try to live up to our commitment to the Triple Bottom Line, where social and environmental responsibility is as important as the financial results. With an estimated 17 million people with diabetes in the US, almost 6 million of them undiagnosed, there is clearly a need for this type of approach.
    For more information, visit novonordisk.com/annual-report-2004 *

could never arrange to go on a trip too much in advance.” That changed when Ms Munroe began using insulin.
     “I didn’t want to take insulin because I thought that would be the beginning of the end. It was just too much – too serious. So I avoided taking it as long as I could. Looking back, I wish I hadn’t been so stubborn because now I’m on insulin and I’ve never felt so good. I’m raring to go. I enjoy riding my bike, swimming in my pool, gardening, going out with friends, making porcelain dolls… I’m never bored, that’s for sure,” she says.
     Staying active means regularly monitoring her blood sugar levels and controlling her diet. “Even though I feel so good,” she says, “I wish there was a cure for diabetes, so that children didn’t have to suffer.”

When choice is limited
Novo Nordisk does not offer its full range of insulin analogues in all parts of the world, as there is not a sufficiently profitable market in all countries for these products. But the company does make human insulin available in most countries of the world, and in 49 of the 50 Least Developed Countries, as defined by the United Nations, Novo Nordisk offers preferential pricing for its human insulin at 20% of its price in the Western world (see page 29).
     As markets and economies develop, and knowledge about the best diabetes care becomes more widespread, it is hoped that the latest advances in insulin therapy can be made available to all who can benefit from them. That would make getting on with life just a little bit easier.

When fear blocks treatment
When Ray ka Msenga’s doctor told him that he was to change from tablets to insulin therapy to treat his type 2 diabetes, he felt shocked.

As far as he knew, an early death was the only possible outcome for people who need insulin injections to live. He felt guilt and anger, and retreated from his closest relationships. Finally, a doctor friend calmly explained why the doctor had recommended insulin, and Mr ka Msenga saw that his fears were exaggerated.

     Had his doctor responded to his fears in the same way, Mr ka Msenga, a former president of the South African Red Cross Society and a member of the International Red Cross, feels he would not have suffered as he had.

     He is not alone. According to the DAWN (Diabetes Attitudes, Wishes and Needs) stakeholder innovation programme initiated by Novo Nordisk in 2001, people with diabetes experience emotional distress and poor psychological well-being, a major contributing factor to impaired diabetes health outcomes. Healthcare professionals acknowledge a lack of resources to identify and care for the many psychosocial problems as well as a major gap with regard to team-based patient-centred communication.

     As the largest study of its kind in diabetes ever conducted, DAWN involved more than 5,400 people with diabetes and more than 3,800 healthcare professionals from 12 countries in collaboration with the International Diabetes Federation (IDF) and an international expert advisory board.

     The main conclusion drawn from the multitude of learnings was that to improve health outcomes in diabetes, the total healthcare system must focus more on the psychological and social issues attached to managing the condition; in other words, address the people behind the disease.

     The ongoing DAWN programme, led by Novo Nordisk in collaboration with the IDF and an expert advisory board, provides a business case for stakeholder innovation and concerted action at national,

regional and international level to improve diabetes care by increasing the availability of psychosocial support for people with the condition. A worldwide call to action emerged from the 2nd International DAWN Summit in 2003 with participation from 31 countries.
     The DAWN message was published in 2004 in more than 140 countries by the IDF and featured in international and national scientific and lay journals to reach millions of people with diabetes, diabetes caregivers and decision-makers. Also in 2004, the DAWN call to action and resulting tools and strategies were used in more than 20 countries to increase awareness of the importance of the psychosocial aspects to optimise treatment. This included updating national diabetes care guidelines to reflect DAWN, holding scientific

symposia on the topic and holding training programmes for health-care professionals.
     In total 33 countries sent in submissions for the 2004 DAWN award to recognise innovative projects aimed at implementing the DAWN call to action.
     In 2005 and 2006, DAWN will include a new focus on the attitudes, wishes and needs of young people and ethnic minorities with diabetes, through new research and dialogue aimed at improving the health and quality of life of these groups and reducing health disparities.
     For more information on DAWN, visit novonordisk.com/annual-report-2004*

Good governance is the system by which companies are directed and controlled,” said Sir Adrian Cad-bury in the report on financial aspects of corporate governance, commissioned by the UK government in 1992. Since then, the intense debate has brought new dimensions to the table: the Danish Nørby Committee calls for accountability towards stakeholders. The US Sarbanes–Oxley Act imposes stricter requirements to financial reporting, internal control and auditing. And the OECD guidelines, updated in 2004, recognising the links between the mainstream financial agenda and broader corporate responsibility, demand insights into the role of stakeholders and shareholder rights.
     These initiatives evolve around essential principles: transparency, accountability, openness, integrity and responsibility put into practice by a combination of statutory requirements and self-regulation.

Beyond compliance
Novo Nordisk is generally in compliance with the codes of good corporate governance designated by the stock exchanges in Copenha-gen (Nørby Committee recommendations on Corporate Governance), New York (NYSE Corporate Governance Standards) and London (Combined Code), where Novo Nordisk is listed. A full overview can be found at novonordisk.com/about_us Based on a review of business practices against current and upcoming requirements, the company has taken steps to further improve its corporate governance. These improvements address four key issues: putting principles into action, shareholder rights, board and management accountability, and risk management.

Audit and Disclosure Committees
In March 2004, Novo Nordisk’s Board of Directors set up an Audit Committee, chaired by Kurt Anker Nielsen. Its two other members are Niels Jacobsen and Ulf J Johansson. All qualify as independent under the US Securities and Exchange Commission Rules. This move follows international trends and meets the requirements of the US Sarbanes–Oxley Act. The Audit Committee assists the Board of Directors in overseeing for example external and internal auditors, accounting and internal controls.
     Employees and other stakeholders can, via the ‘whistleblower’ system, anonymously bring to the attention of the Audit Committee any issues or concerns they might come across pertaining to accounting malpractices or irregularities.
    Another step to formalise internal procedures is the Disclosure

Committee, established in November 2004. It is chaired by the chief financial officer, with the mandate to consider the materiality of information, determine disclosure obligations and oversee the publication of stock exchange announcements.

A key role for stakeholders
The company values open and transparent communication. Without sufficient insight, stakeholders have little chance of assessing the company’s performance. That is why the company pro-actively engages in dialogues with rating agencies, analysts, investors and others with an interest in Novo Nordisk’s business. The aim is twofold. First, to better address stakeholders’ concerns, align with different views and focus on the issues that matter to the company’s ability to pursue its vision. And second, to candidly convey the company’s positions and rationale for its decisions. *

	Strengthening the stand on corporate governance In 2004, Novo Nordisk’s Board and Executive Management took steps to ensure that the company maintains its position as a trustworthy business:
		Putting principles into action
		Formalised ‘whistleblower’ function established under the remit of the Audit Committee. Also, employees can bring to the Novo Nordisk Ombudsman any personal and organisational issues which conflict with the company’s values and fundamental management systems.
		Shareholder rights
		Equal access to information: simultaneous translation into English at the Annual General Meeting in March 2005.
		Board and management accountability
		Audit Committee (board), Disclosure Committee (management), improved disclosure and current updates at novonordisk.com/about_us
		Risk management
		Systematic and integrated risk management approach (see page 56).

Pharmaceutical companies are in the business of developing and manufacturing healthcare products for the good of humankind. This entails a particular social responsibility. But there is a growing perception that the industry is failing to help solve real health challenges and instead is too focused on its own profitability. Other issues on the agenda are the degree to which it funds public research and engages in the post-graduate education of healthcare providers, the full and timely disclosure of clinical trial results, perceived overzealous marketing and unhealthy political influence. The public, government authorities and others are demanding more transparency.
     “Public authorities and NGOs have sharpened their tone, and we must take them seriously,” says President and CEO of Novo Nordisk, Lars Rebien Sørensen. “It is important to be open and honest about our stand and our actions. Trust has to be earned.”

The Novo Nordisk way
As one response to the increased focus on ethical business conduct, the Board of Directors has endorsed that a Novo Nordisk policy on business ethics be added to the existing set of policies and that operational procedures are conveyed to employees. Furthermore, in 2005 the current policies in the Novo Nordisk Way of Management will be reviewed to ensure that business ethics are sufficiently addressed in each policy.
     Novo Nordisk also participated in The UN Global Compact Leaders Summit, where the 10th principle on fighting bribery and corruption was endorsed. The company has committed to this principle.

Working in partnership
Novo Nordisk works with many partners to address key areas of corporate responsibility. Reaching out to stakeholders helps reconcile

dilemmas and find common ground for more sustainable solutions. It also helps the company’s monitoring of trends that can affect its future business.
     “If all the different groups involved in the healthcare sector are to trust each other, a partnership concept is essential. We all have our own values. If we put them all on the table, we could perhaps find some that we share,” says Lise Kingo, executive vice president of Novo Nordisk for people, reputation and relations.
     For more information on Novo Nordisk’s stakeholder engagement, see novonordisk.com/ annual-report-2004

Investors look for leadership
How well a company responds to non-financial risks is sparking interest among some large investors who are beginning to evaluate companies based on their strategies to address social, environmental and governance risks.
     “At a time of intense scrutiny of the industry, investors are looking for companies that stand out because they perform well in social, environmental and ethical areas,” says Stewart Adkins, senior analyst for the pharmaceutical industry at Lehman Brothers. “Investors feel greater trust in such companies, finding that they are less likely to be subject to litigation or have difficult relationships with key stakeholders. And that makes a better long-term investment.”

Facing the critics
In 2004, Novo Nordisk was put to the test with legal challenges of its own. Lars Rebien Sørensen, president and CEO of Novo Nordisk, responds below to general industry criticism as well as specific issues.

Critics say that the industry is not doing enough to increase access to medicine in developing countries.
There’s no doubt that the industry was late in getting its act together

when it comes to increasing access to medicine, but I think today many companies are doing a lot. Our own approach is based on the priorities of the World Health Organization for improving access to medicine [see page 28].

The industry is charged with suppressing negative clinical trial results and not making all results publicly available.
I will not engage in a discussion about the cases which have triggered the debate, because I don’t know the cases well enough. But speaking about the issue in general, I’m strongly in favour of increasing transparency when it comes to clinical trials – we cannot live with the perception that the industry is hiding important information from the public.
     Starting in 2005 we will publish the results of all our clinical trials of marketed compounds in a public database in accordance with the principles laid out by the pharmaceutical manufacturers’ associations. Likewise we will publicly report the initiation of all new phase 2, 3 and 4 clinical trials at a public trial registry in accordance with the specifications and requirements from the International Committee of Medical Journal Editors. In addition, we adhere to international as well as internal ethical standards on the conduct of clinical trials, and are committed to making the results publicly available regardless of the outcome of the trial.

The industry is accused of having doctors under its thumb by funding most post-graduate medical education and sponsoring most clinical trials.
I hate to see doctors portrayed as the pharmaceutical industry’s marionettes. It’s not the picture I get. Most doctors I know – and I meet many in my job – are people who hold themselves to high moral standards, who are not under anyone’s thumb and whose first priority is to meet the needs of their patients. Having said that, I would like to see increased public funding of research and postgraduate medical education, so doctors have more sources of funding to choose from. That’s in everybody’s interest.

Novo Nordisk is one of several pharmaceutical companies under investigation for illegal activities related to public tenders in Brazil in which it is alleged that businesses conspired with Health Ministry officials and others to inflate the prices of ministry purchases, including insulin.
Novo Nordisk does participate in tenders in Brazil, but an independent investigation that we conducted through an international law firm concluded, based on available information, that no individuals at the Novo Nordisk affiliate had done anything wrong. We will support our employees in their defence in these cases.

Novo Nordisk is one of 44 pharmaceutical companies named in a lawsuit filed by New York City that claims
the city was overcharged on drugs used for its
Medicaid programme, the government health
insurance programme for needy people.
The claim against Novo Nordisk is that we artificially inflated

reimbursement prices for three products, which led to allegedly inflated Medicaid payments to the pharmacies that dispensed these products. To the best of our knowledge Novo Nordisk correctly calculated the reimbursement prices for the products in question.

Over the past few years, several thousand women have filed lawsuits against pharmaceutical manufacturers and sellers for alleged injuries arising from their use of hormone replacement therapy (HRT) products.
Novo Nordisk Inc., together with the majority of hormone therapy product manufacturers, is a defendant in 16 product liability lawsuits. Since the initiation of the lawsuits in July 2004, three cases against Novo Nordisk Inc. have been dismissed by the courts. Novo Nordisk’s hormone therapy products (Activella^® and Vagifem^®) have been sold and marketed in the US since 2000. Until July 2003, the products were sold and marketed exclusively in the US by Pharmacia & Upjohn Corporation (now Pfizer). The proceedings are in their preliminary stages and at this point we can’t provide further information. *

NOVOSEVEN^®

The 60 minutes following a car crash is what emergency crews aptly call ‘the golden hour’, when doctors have the best chance of saving a life. But many people suffering trauma injuries from a car crash literally bleed to death before a surgeon can intervene. Stopping that bleeding could make the critical difference to the millions of people who experience serious trauma every year. About five million people are killed by traumatic injuries each year worldwide, such as motor vehicle accidents, gunshots, knife wounds or falls. That number is expected to reach 8.4 million by 2010, according to the World Health Organization. That’s close to 10% of all deaths worldwide.
     “Most trauma deaths are due to blood loss or the complications of fighting that blood loss,” says Dr Carl J Hauser, professor of surgery at the New Jersey Medical School, who specialises in critical care.
     He was among the doctors who were excited by the news at the 6th World Congress on Trauma, Shock, Inflammation and Sepsis in Munich, Germany, in March 2004 that recombinant factor VIIa, marketed by Novo Nordisk to people with haemophilia with inhibitors under the name NovoSeven^®, could have a future in the treatment of critically bleeding trauma patients.
     Also promising were early clinical trial results during 2004 for the use of NovoSeven^® in intracerebral haemorrhage (ICH) – the most dangerous and least treatable form of stroke.
     NovoSeven^® is currently approved for treatment of the estimated 3,400 people with haemophilia with inhibitors in the developed world, as well as in Europe for people with acquired haemophilia, and the rare bleeding disorders Glanzmann’s thrombasthenia and factor VII deficiency.

Hope for stroke victims
Dr Stephan Mayer, a neurologist who heads an intensive care unit at Columbia University Medical Center in New York City, often sees the devastating impact of ICH – for which there is no proven treatment.
     An intracerebral haemorrhage occurs when a blood vessel inside the brain ruptures, leaking blood directly into the brain tissue. Studies indicate that around 250,000 people in North America, Europe and Japan experience ICH each year.
     “I’ve sat many times with ICH patients in the intensive care unit, unable to do anything but watch them gradually sink into a coma. It is as if they are drowning on the inside. It is terrible to watch,” says Dr Mayer, who was lead trial investigator in the phase 2 trial of NovoSeven^® as a treatment for ICH.
     People who survive intracerebral haemorrhages are left with more severe disabilities than survivors of other forms of stroke, including loss of movement, speech and mental capability. About 50% of people who experience an intra-cerebral haemorrhage die within 30 days.
     Dr Mayer has worked with ICH patients for 10 years; the results of the phase 2 trial, announced in June 2004, were more than he hoped for.
     The ICH trial showed that use of NovoSeven^® could reduce the volume of blood leaking into the brain during intracerebral haemorrhage when administered within four hours of onset.

Next steps
“I was thinking that maybe if we reduced bleeding a bit we could improve the lives of patients; what we found was that we reduced bleeding and had incredible reductions in poor outcomes,” Dr Mayer says.
     According to Dr Mayer, with the use of NovoSeven^®, mortality appeared to be reduced by a third and the number of patients in the trial who survived with none or limited disability tripled.
    Some 400 patients in 20 countries worldwide participated in the trial, making

it the largest ever ICH-focused clinical trial with a biopharmaceutical agent. Following regulatory consultations in Europe, Novo Nordisk expects to file an application for marketing approval in Europe for the use of NovoSeven^® in connection with ICH by mid-2005.
     Mads Krogsgaard Thomsen, chief science officer of Novo Nordisk, underlines the implications for the future. “I think we’ll see much less disability and mortality in the long term when NovoSeven^® comes to ICH patients. We now have what we think is a major breakthrough in the management of a hitherto intractable disease.”

Saving lives from trauma
“When it comes to trauma,” says Dr Hauser, “we’re talking about the possibility of saving thousands of lives, perhaps tens of thousands.
    ” Based on the results of clinical trials for the blunt trauma indication, NovoSeven^® was submitted for the treatment of blunt trauma in Europe in January 2005. “We hope approval of NovoSeven^® for the blunt trauma indication in Europe could come in 2005,” says Dr Krogsgaard Thomsen.
    The trial for the trauma indication was conducted on a group of

283 patients who were treated at trauma centres around the world. All were in danger of bleeding to death; on a random basis, each received either NovoSeven^® or placebo plus standard therapy. In those receiving NovoSeven^®, the study found that:

	NovoSeven® reduced the need for red blood cell transfusion
	NovoSeven® has the potential to reduce complications such as multiple organ failure and acute respiratory distress syndrome
	adverse events such as thromboembolic events showed no higher rate of incidence than for placebo.

It is particularly important to note that a massive transfusion can itself put a trauma patient at risk of infection, multiple organ failure and hypothermia, which inhibits normal coagulation. Thus, reducing the need for transfusion reduces other risks.
     A study on the use of NovoSeven^® in trauma patients in the US will start in 2005.

Weighing the ethical issues
Novo Nordisk has undertaken an internal ethical review of

NovoSeven^® to explore any potential issues so that they can be addressed proactively.
     Ethical dilemmas exist around any pharmaceutical product, most often relating to access and price, and NovoSeven^® is no exception, says Lars Rebien Sørensen, president and CEO of Novo Nordisk.
     The key dilemma concerning NovoSeven^® is how to price it in its new indications to reach the most people who need it, while maintaining a profitable and healthy business.
     “While we don’t yet have all the answers, pricing is an issue we take seriously and intend to address as regards these new indications,” says Mr Rebien Sørensen. The potential cost of using NovoSeven^® in Europe for the treatment of ICH is approximately 3,000–3,800 euros per patient and for trauma in the range of 7,500–19,000 euros per patient (average body weight of 70 kg) depending on how fast the bleeding can be stopped (depending on its severity). “I think Novo Nordisk has priced NovoSeven^® appropriately for catastrophic or rescue use for the developed world. But that pricing structure is not sustainable in the developing world. If there is a price differentiation between the wealthier and poorer parts of the world, it must be with the understanding that the developed world will foot the research bill.” According to Dr Mayer, the cost of NovoSeven^® should be viewed in terms of overall medical costs. Stopping or slowing life-threatening bleeding during trauma, surgery or ICH can, for example, reduce the need and cost of blood transfusions and medical intervention in the hospital or trauma centre.
     In addition, use of NovoSeven^® has the potential to prevent future disabilities or deaths, which are extremely costly to society, he adds.
     “The use of NovoSeven^® gives us the chance to avert disaster –the subsequent deterioration that leads people to bleed and die, or end up so physically and mentally impaired that they must spend the rest of their lives in a nursing home,” says Dr Mayer.
     According to the National Institute of Neurological and Stroke Statistics of the National Institutes of Health in the US, the national cost of lost productivity due to stroke (that is, lost family income) runs into billions of dollars a year. Many persons who suffer stroke end up in chronic care facilities such as nursing homes, which, in the US, cost thousands of dollars a year. “So from a socio-economic point of view, we believe the potential cost of using NovoSeven^® is appropriate,” explains Mr Rebien Sørensen.

Bleeding in surgery
In addition to trauma and ICH, there are other potential indications for NovoSeven^® currently being tested in clinical trials. Some of those relate to bleeding that occurs during surgery, which can cause complications during or after surgery, such as cardiac surgery, spinal surgery and liver transplantation, as well as for upper gastrointestinal bleeding in people with cirrhosis.
     Those are just a few of the ways NovoSeven^® could begin to serve as the world’s first general haemostatic agent for critical bleeding.
     For more information, visit novonordisk.com/therapy_areas *

Novo Nordisk has begun clinical testing in humans of a potential cancer drug, interleukin-21 (IL-21). The phase 1/2 study, which is being conducted in Australia, is part of what could become a new therapy area for the company.
     Peter Kurtzhals, senior vice president of Discovery, explains: “We cannot say that we have a new therapy area until we have an approved product. But we have previously stated that our research strategy is aimed at maximising the value of our competences in therapeutic proteins – and if this goes well, it will invariably result in a new therapy area.” The drug is being tested on people with malignant melanoma – in the Western world around 90,000 new cases of this aggressive, life-threatening form of skin cancer are diagnosed per year and around 15,000 die every year from this disease. The clinical testing, which began in September 2004, will be conducted on a maximum of 40 persons.

Kidney cancer
Another possible indication for IL-21 which Novo Nordisk plans to investigate is renal cell carcinoma, a cancer affecting the kidney. The company has applied for and received orphan drug status for IL-21 in the European Union. Orphan drug status can speed up the development process for a drug and allows its developers certain financial and marketing advantages.However, the designation is only given by the authorities to drugs being developed for the treatment of serious, rare diseases for which little financial return is expected and where few other treatment options are available.

     Renal cell carcinoma qualifies for this designation because, in addition to its life-threatening nature, it affects relatively few patients (3.21 cases per 10,000 persons in the EU); moreover, there is at present little possibility of effective treatment.
     Orphan drug status for IL-21 was approved by the EU Commission on 2 September, based on a recommendation by the European Medicines Agency’s Committee for Orphan Medicinal Products.
     Peter Kurtzhals notes that, as research proceeds, other indications such as colorectal cancer and ovarian cancer may be developed for the drug.

Suppressing the tumour
     IL-21 is a novel protein which appears to stimulate the immune system to kill cancer cells.
     The protein was discovered by scientists at the American biopharmaceutical company Zymo-Genetics; Novo Nordisk has been investigating IL-21 in collaboration with this firm. In March 2004, this collaboration became a clinical data-sharing agreement in which the two companies make results available to each other, says Global Regulatory Affairs Project Manager Anita Osborne of the IL-21 team.
     According to the terms of the agreement, ZymoGenetics has commercialisation rights for IL-21 in North America, while commercialisation rights in the rest of the world are licensed to Novo Nordisk.

Afghan construction workers toss mud onto the roof being built at the Rabia
Balkhi Women’s Hospital in Kabul, Afghanistan.

When war takes a toll
on health

In war-ravaged countries, getting medicines and treatment to people in desperate need of healthcare is a considerable challenge. Novo Nordisk is doing what it can to help people with diabetes in two such countries: Afghanistan and Iraq.
     An estimated 917,000 people in Afghanistan have diabetes, most of them undiagnosed and untreated. To begin to address this critical gap in care, in October 2004 the World Diabetes Foundation, an independently governed foundation established by Novo Nordisk in 2001, and the Afghan Ministry of Health initiated a new project: the Diabetes Control and Treatment Programme for Afghanistan. The agreement provides 400,000 US dollars to renovate and equip four diabetes centres in Kabul over the next two years.
     In addition, the company arranged a training seminar in June 2004 for 20 Afghan doctors, including three directors from the Ministry of Health. A follow-up session was held in November. Novo Nordisk also established the Afghan Medical Relief Foundation. The goal of this new non-profit organisation is to bring life-saving medicines to Afghanistan. The foundation will raise money through fundraising, buy life-saving medicines including insulin, antibiotics, vaccines and other medicines, and donate these to hospitals and diabetes centres throughout Kabul and eventually, when security and infrastructure allows, throughout the country.
     In Iraq, the current prevalence of diabetes is unknown but it is believed to be a large-scale problem. The International Diabetes Federation estimated in 2003 that 7.7% of the population has diabetes.
     Novo Nordisk has been supplying insulin to Iraq since 1972 and, since 1991, the company has been virtually the sole supplier of insulin to the Iraqi people.
     Beyond meeting the immediate needs of Iraqi patients, Novo Nordisk also arranges for the training of Iraqi doctors and nurses in diabetes care, in cooperation with the Iraqi Diabetes Association. It is working with the Ministry of Health to create a national diabetes programme that will include the development of diabetes centres and public clinics, continuous education for doctors and nurses, and patient awareness programmes.

“Living with diabetes for a week at the diabetes camp has totally changed my perception.”
Marta Wielondek, Novo Nordisk

Children teach life lessons
in TakeAction! project

Marta Wielondek, senior product manager in the Region Europe office of Novo Nordisk, thought she knew all about diabetes after three years with the company. But spending a week at a summer camp for children with diabetes in Poland as part of the company’s TakeAction! programme made her realise how much she still has to learn.
     “Living with diabetes for a week at the diabetes camp has totally changed my perception,” says Ms Wielondek.
     Marta Wielondek is one of 21 Novo Nordisk employees from Region Europe who volunteered to spend part of their summer working hours at a summer camp for children with diabetes. The idea was to give employees an insight into the lives of children with diabetes, develop relationships with local diabetes associations to promote future collaboration, and to offer extra help in the camps free of charge to the camp organisers.
     The TakeAction! programme, launched in 2003, encourages employees to carry out individual or team activities in the name of sustainable development. This includes working at diabetes clinics in developing countries, participating in walkathons to raise money for diabetes, and taking steps to improve the environment. For more information on the TakeAction! programme, visit novonordisk.com/annual-report-2004

Activelle^® low dose
Indication Oestrogen deficiency symptoms in women more than one year after menopause. Prevention of osteoporosis in postmenopausal women at high risk of future fractures who are intolerant of, or contraindicated for, other medicinal products approved for the prevention of osteoporosis Description Low-dose continuous combined HRT within the ultra low-dose class Phase Phase 3

NovoSeven^®: intracerebral haemorrhage
Indication Bleeding in emergencies, intracerebral haemorrhages Description Phase 2b studies of NovoSeven^® as a general haemo-static agent for treatment of intracerebral haemorrhages have been completed. Filing in the EU is anticipated in mid-2005. A second study will be initiated in the US
Phase Not applicable

NovoSeven^®: trauma
Indication Bleeding in emergencies, trauma
Description Phase 2 studies of NovoSeven^® as a general haemo-static agent for bleedings related to traumatic injuries have been completed. Filing for blunt trauma in the EU took place in January 2005. A study in the US will be initiated in 2005 Phase Not applicable

NovoSeven^®: variceal bleedings
Indication Bleeding in emergencies, upper gastrointestinal bleeds in cirrhotic patients Description NovoSeven^® is being tested as a general haemostatic agent for treatment of bleedings from oesophageal varices in connection with liver cirrhosis Phase Phase 2

NovoSeven^®: cardiac surgery
Indication Cardiac surgery
Description NovoSeven^® is being tested as a general haemostatic agent for treatment of bleedings in connection with cardiac surgery Phase Phase 2

NovoSeven^®: traumatic brain injury
Indication Bleeding in emergencies, traumatic brain injury
Description Traumatic brain injury (TBI) occurs as a result of a sudden injury to the head. TBI is most commonly caused by road traffic accidents and is primarily affecting younger men Phase Exploratory phase 2

NovoSeven^®: spinal surgery
Indication Critical bleeding in surgery, spinal surgery
Description NovoSeven^® is being tested as a general haemostatic agent for treatment of bleedings in connection with spinal surgery Phase Exploratory phase 2

rFXIII
Indication Haemostasis management
Description FXIII stabilises blood clots, indicating that FXIII alone or in combination with other therapy might become an interesting new opportunity within haemostasis management Phase Phase 2 is in planning

IL-21
Indication Cancer (malignant melanoma)
Description A study testing interleukin 21 (IL-21) for the treatment of the cancer malignant melanoma Phase Phase 1/2

Clare Rosenfeld considers herself lucky. While she has had type 1 diabetes since the age of seven, the 18-year-old from Eugene, Oregon in the US, has always had access to the medicine and the doctors she needs to cope with her condition. But as Ms Rosenfeld, who is the founder of the International Diabetes Youth Advocacy Group, found out on a Novo Nordisk-sponsored tour of its projects in Tanzania, El Salvador and Bangladesh in 2004, that kind of access is rare for children and adults with diabetes in the developing world.
     “There is no reason why people who by all rights should be living normal, healthy, productive lives should die when treatment is available. Something must be done,” Ms Rosenfeld writes, after meeting many children, young people and adults who struggled – and some-

times failed – to cope with their diabetes because of lack of access to treatment.

A complex challenge
Seeing the world in a new context can be an eye-opening experience. For Novo Nordisk, the challenging state of diabetes care in the developing world has long been apparent.
     Meeting this challenge is complicated. Low- and middle-income countries often lack the healthcare infrastructure to meet the needs of a growing number of people with diabetes. Lack of awareness and education about diabetes is a serious problem. Many experts believe that the only way to fight diabetes, in the developing world as elsewhere, is by taking an approach that combines increased awareness, education and prevention with improved access to treatment.

     “By working together with governments, patient organisations and other partners to improve diabetes care in poorer countries, we can use our expertise and competence in diabetes to address some of these issues,” says Lise Kingo, executive vice president for people, reputation and relations at Novo Nordisk. “At the same time, we build a long-term sustainable business advantage as a leader in diabetes care.”
      Investors are increasingly paying attention to how companies act to address the public health crisis in the developing world because they fear that not acting will damage companies’ societal licence to operate – and thus, profitable returns in both the short and long term.
      “I think investors do care about a company’s social, ethical and environmental performance because it is an indicator of two things: the quality of management and the risk profile. If a company responds to these issues, it will probably have less risk associated with it,” says Analyst Benjamin Yeoh of ABN-AMRO, a major investment bank.

Bridges to better care
Since 2001, Novo Nordisk has had a four-pronged strategy to addressing access to health in the developing world that builds on the WHO’s four major focus areas for improving access to healthcare.
     Building national healthcare capacity and developing national disease strategies is at the heart of the National Diabetes Programme (NDP), a collaborative approach to improving diabetes care globally. Today there are 213 separate activities carried out by Novo Nordisk affiliates in 46 countries, in both the developed and the developing world. Activities include educating nurses, doctors and patients, supporting diabetes patient organisations, equipping diabetes clinics and working with governments to design national diabetes strategies.
     The NDP is setting up diabetes activities in eight developing or emerging economies: India, Bangladesh, China, Costa Rica, El Salvador, Malaysia, Tanzania and Zambia. As a result, there has been an increase in the number of people reporting to diabetes clinics, a greater proportion being treated, and more newly diagnosed persons with diabetes reporting early; that is, before they have started developing severe complications. It is estimated that 50–80% of people with diabetes in the developing world are undiagnosed.

More affordable pricing
Improving the affordability of essential drugs like insulin is also part of the solution to better access to care. In recognition of this, since

2001 Novo Nordisk has offered insulin to the public health systems in the 50 Least Developed Countries (LDCs), as defined by the United Nations, at prices not to exceed 20% of the average price in the industri-alised countries of North America, Europe and Japan. In 2004, Novo Nordisk offered this pricing scheme to 49 countries and sold insulin to a total of 33 LDCs at or below this price, compared to 16 in 2003. In several cases, the government has not responded to the offer; either because there are no private wholesalers or other partners with whom to work; or wars or political unrest sometimes make it impossible to do business. Unfortunately, there is no way to guarantee that the price at which Novo Nordisk sells the insulin will be reflected in the final price on the pharmacist’s shelf. Novo Nordisk therefore works with governments to encourage tenders, so that there is a greater chance that the preferential price will benefit the patient for whom it is intended.

     The affordability of medicine is just one of the many problems that Clare Rosenfeld encountered on her trip. Just as serious was the widespread ignorance about diabetes among the general population, lack of knowledge among doctors, and the lack of clinics and equipment to treat diabetes.

“The answer seems clear to me: collaboration,” Ms Rosenfeld writes. “Collaboration between patient associations, healthcare professionals, the government and the pharmaceutical companies can tackle all the problems in these countries. I saw a lot of tough things, but I also saw the potential and the passion to make a difference.” For more information, visit novonordisk.com/annual-report-2004 *

Working with suppliers on social and environmental issues can benefit a company’s financial bottom line, according to a model commissioned by Novo Nordisk. The model indicates that the return on investment for sustainable supply chain management is created through financial and reputational benefits for both parties.
     The model concludes that there are both direct and indirect implications which can be identified if not yet quantified. According to the model, effective sustainable supply chain management can affect the bottom line in two ways: through costs and through turnover. Total costs, in turn, are affected by production costs and cost of capital.
     Benefits include higher product quality and reduced risk as well as a positive impact on the company brand. In a broader perspective there are benefits to society, such as reduced pollution and fewer work-related injuries and accidents. Suppliers can measure the effects of improving labour standards and environmental management in terms of fewer costs related to compensa-

Like ripples in the water: Novo Nordisk is encouraging
its suppliers to look at their own supply chains.

tion, reduced pollution charges, etc. As important, perhaps, is closer collaboration and sharing of better practices between Novo Nordisk and its suppliers, and better self-regulation and documentation towards regulatory authorities.

     Novo Nordisk has had a comprehensive supply chain management programme since 2001, when it began requiring its suppliers to complete a self-evaluation questionnaire regarding their environmental and social performance. The latter deals with treating employees fairly in terms of wage and benefits, working hours, child labour, collective bargaining and other issues described in The United Nations Universal Declaration of Human Rights and the International Labour Organisation’s Core Conventions.
     The programme, which now includes audits, is expected to cover all major areas of purchase by 2005.
     Now reaching out to second-tier suppliers, Novo Nordisk has developed a new toolbox for its suppliers and other companies who intend to engage in a programme with their suppliers which is available at suppliertoolbox.novonordisk.com
     Read more, and see the research behind the model of the financial impacts, at novonordisk.com/annual-report-2004

Improving standards for
experimental animals

Novo Nordisk actively practises a principle known collectively as the three R’s – which means that the company attempts to reduce, refine and replace animal experiments with alternative procedures whenever possible. Novo Nordisk considers experiments on living animals to be a necessary component of the research and development process for new medicines for both scientific and mandatory reasons, and to satisfy expectations of drug regulatory authorities. In the past decade, Novo Nordisk has set new standards for housing, training and socialisation of laboratory animals and significantly reduced the number of animals used. Due to a higher research activity in early phases, this positive trend could not be maintained in 2004, as 10% more animals were purchased.

     In 2004, both an approval by the US Food and Drug Administration (FDA) and the development and approval of a new test method will enable Novo Nordisk to reduce the number of animals used by the company even further:

	In the fourth quarter of 2004, the FDA approved a reduction in the numbers of animals required to test insulin-based products, resulting in a considerable reduction of rabbits used for this purpose.
	Novo Nordisk has developed a novel test for glucagon that utilises isolated cells in vitro rather than living animals, which was approved for use by the FDA in October 2003. Implementation of this new test was completed in the third quarter of 2004 and rabbits are no longer used for this purpose.

     Novo Nordisk has committed itself to investigate further approaches to practising the three R’s and, therefore, to reduce the use of living animals in the future, as and when this becomes possible due to establishment of newly emerging regulations and technologies. For more information, visit À novonordisk.com/annual-report-2004

More than 99% of our sales are in countries outside Denmark,” observes Chief Financial Officer Jesper Brandgaard. “Yet only 41% of our employees are working outside the country. We must internationalise to fulfil our vision and stay competitive in the pharmaceutical industry.”

Supporting the markets
Making the most of the US market is vital: sales in North America are expected to overtake Europe within the next 5–10 years, making it Novo Nordisk’s largest region. To support US growth, Novo Nordisk will invest 100 million US dollars in expanding its insulin manufacturing plant in North Carolina (see box opposite) and has transferred some major development responsibilities from Danish headquarters to the US affiliate. Actions also include recruiting more US participants into its global trainee programmes.
     Other efforts have targeted the International Operations region, where the growth potential is generally regarded to be greater than in Europe. Actions include major investments in new manufacturing facilities in Brazil and China which also comprises intensified talent recruitment.

Costs, risks and innovation
But internationalisation is not just about sales growth.
    “Increased activities outside Denmark provide Novo Nordisk with a more competitive cost base and a more balanced exposure to risks

such as currency fluctuations,” notes Jesper Brandgaard. Novo Nordisk has already taken steps to outsource production of needles and plastic components for the pen systems. By choosing global partners when outsourcing, Novo Nordisk will ensure competitiveness and ‘insource’ knowledge from these key performers in the market.
     Chief Science Officer Mads Krogsgaard Thomsen adds that internationalisation also potentially benefits the Novo Nordisk pipeline: “We need to increase our access to research and development conducted outside Denmark. To find all the skills needed for future development, it is essential that we recruit even more new, international talent,” he says.
     Mads Krogsgaard Thomsen is also convinced that international partnerships with companies outside Novo Nordisk will become increasingly important to the R&D pipeline – particularly in view of the company’s growing focus on proteins outside the established therapy areas. Through agreements with partners including ZymoGenetics, Biostratum, Transition Therapeutics, Innate Pharma and Neose, Novo Nordisk currently has an exciting early-stage pipeline of eight projects targeting cancer or inflammatory diseases. As of September 2004, Novo Nordisk had established 26 discovery and early development partnerships and the company is seeking even more.

New employment patterns
One area which has been at the forefront of internationalisation is Product Supply, which comprises all manufacturing in Novo Nordisk.

     Expansion of production facilities is already taking place in Montes Claros, Brazil; Chartres, France; Tianjin, China; and Clayton, US. “We expect that the expansions will create approximately 1,000 new jobs outside Denmark in the coming five-year period,” explains Senior Vice President Per Valstorp from Product Supply.
     However, he continues: “While new jobs will be established abroad, employee numbers will most likely decrease in Denmark in the same period. To embrace the changes in employment patterns in Denmark, Product Supply has established a Job Transfer Centre which is operating in Denmark only. The system allows employees at downsized Danish production sites to register their skills and preferences at the centre, which can then refer them to jobs and relevant training within Novo Nordisk.”
     “The alternative to this would have been layoffs. So I think this is a good example of social responsibility on the part of the company,” remarks union representative Jan Carstensen, who represents unskilled and semi-skilled workers at a number of Danish production sites.

A strategy for people
In the company’s philosophy, Novo Nordisk is its people. Its People Strategy supports the objectives of being an attractive and challenging workplace focused on high performance and equal opportunities for each to develop and grow.

     To better prepare the company for its international growth, the People Strategy now focuses on mobility: the ability to recruit and develop international talent.
     “We want to put the best person into any job, regardless of where they come from; we also want to reduce the geographical barriers to talent movement,” says Ginger Gregory, senior vice president of People and Organisation at Novo Nordisk.
     To facilitate this, the new unit is developing a global system of job descriptions, remuneration and talent evaluation. This will ensure that mobility across Novo Nordisk’s operating units globally becomes much smoother and that diversity increases across the organisation.
     For more information, visit novonordisk.com/annual-report-2004

Fulfilling a vision
When all else has been said, one final observation remains: Novo Nordisk must continue to increase its presence around the world to fulfil its vision of being the world’s leading diabetes company.
     Jesper Brandgaard sums it up: “The fulfilment of this aspiration will require Novo Nordisk to be present. Present with our customers where they live and work, present with regulators and other authorities, present with business partners, universities, investors and other stakeholders.”

PEOPLE

Of course I know what the Triple Bottom Line means. But today, I really experienced it. And I know why Novo Nordisk has embraced it,” remarks Finn Benned Hansen following his participation in the Lighthouse Programme’s visit to Brazil in December 2004.
     The Lighthouse Programme is an innovative way in which Novo Nordisk is developing the next generation of the company’s leadership. ‘Destination Brazil’ brought 32 of the company’s top talents together for seven days to experience economic, social and environmental conditions in Brazil – an important emerging market for the company. The main goal was to build a sense of community among a group of executives to enhance their understanding of one another, their ability to work together and their sense of the world around them. The journey was led by Lars Rebien Sørensen, president and

Visit to GRAACC, a children’s cancer centre in São Paulo.

Community work at a paediatric clinic in São Paulo.

CEO of Novo Nordisk, and addressed global business and health challenges, doing business in emerging markets, sustainability as a business factor and leading with passion.
     In this first Lighthouse journey, the ‘classroom’ stretched from crowded urban streets to the rainforest, and teachers included local business leaders, government ministers and representatives of indigenous peoples. The journey took employees from the relative comfort of their corporate jobs to the heart of the company’s strategic agenda: globalising the business, improving access to health and dealing with thorny dilemmas posed by fulfilling its commitment to the Triple Bottom Line.
     Developing talent is a top priority for Novo Nordisk if it is to continue to succeed in a highly competitive market. In March 2004, the company established a new centre of excellence called Global Talent Development to facilitate identification and development of talent throughout the organisation. This global oversight is a business

‘Life Line session’ with Lars Rebien Sørensen, president and CEO of Novo Nordisk.

imperative at a time when the company is expanding internationally.
     Talent is managed across Novo Nordisk in a number of talent pools that have been established during 2003 and 2004 to give people opportunities to develop their skills towards the next level in the organisation. This might take the form of opportunities to discuss strategic business issues with other company leaders, including top management, or taking on a challenging assignment with a real impact on the business. The Lighthouse Programme is just one of many initiatives to develop talent.
     Lise Kingo, executive vice president for people, reputation and relations at Novo Nordisk, says: “It is too early to say how the Lighthouse journey will shape the next generation of Novo Nordisk leaders. But we expect that the participants will be driven to carry out their jobs with even greater passion and be able to cascade their new sense of vision throughout the organisation.”

A strategy for diversity
For companies to tap talent, the greatest opportunities are in diversity. Novo Nordisk operates in 78 countries and comprises a wide range of different nationalities. To achieve the full potential in talent management, it is important to ensure a level playing field. With its strategy for equal opportunities (EO) and diversity, Novo Nordisk is creating sound diversity in the organisation that can support internationalisation of business and spark continued innovation.
     Novo Nordisk has made diversity an integral part of management training and incorporated targets on diversity into the corporate management tool, the Balanced Scorecard, and evaluates the performance on EO and diversity in the organisation each year.
     Based on this evaluation, in 2004, Novo Nordisk began to see the first results of this strategy being embedded in the organisation. For example, in South Africa Novo Nordisk increased the diversity of its medical representative staff to better reflect the community it serves. In the US there were targeted efforts to reach out to minorities disproportionately affected by diabetes. Brazil is collaborating with organisations that work with disadvantaged sections of society.

     In Denmark the affiliates NNE and NNIT are working to improve their ability to attract and develop talent from an increasingly diverse society. Both have broadened the recruitment base by focusing on values which appeal to different types of applicant. NNIT has found new channels of communication to reach new groups of potential candidates, and recruitment tests are now available in 80 languages. In 2004 NNE recruited an increased number of women compared to previous years.

Women in management
Another focus area during 2004 was increasing the number of women in management, based on an analysis conducted in 2003. One initiative was the formation of a Sounding Board of women and men to discuss issues and coordinate activities relating to women in management.
    Other activities launched in 2004 include:

	the formation of women’s networks, in which women identified as leaders are invited to participate in network groups on women in management
	a mentoring programme in which women identified as potential leaders in the organisation are invited to be mentored by a member of senior management
	a review of the performance and succession management systems to achieve greater transparency, including looking at leadership competences from a gender perspective.

“Women often face informal rather than formal barriers in the work-place,” says Kirstine Brown Frandsen, vice president of International Medical Affairs at Novo Nordisk and a member of the Sounding Board. “Women may have different ways of working, communicating and leading than men, and it is important that we talk about it openly so that these differences are understood and appreciated.”
    For more on equal opportunities and diversity, visit novonordisk.com/ annual-report-2004

Visit to indigenous tribe in Iguassu.

Climate change is one of the serious environmental challenges facing humankind. The rising level of greenhouse gases in the atmosphere is changing global climatic patterns, resulting in increased incidences of floods, storms and droughts, affecting habitats, biodiversity, food systems, economies and human life. Tackling an issue as complex as climate change requires a concerted effort from government, business and civil society.
     The environmental strategy of Novo Nordisk, which determines the priorities and long-term strategic focus areas, has highlighted climate change, use of natural resources and management of pollution as the key long-term environmental challenges for its business. As a business committed to addressing climate change, Novo Nordisk is developing a strategy to reduce its emissions of CO₂. In 2004 Novo Nordisk entered into a partnership with the WWF whereby it has committed to reduce its CO₂ emissions. During 2005, WWF will work with Novo Nordisk in setting a below stabilisation target for achieving an absolute reduction of CO₂ by 2014. Such a commitment will enable Novo Nordisk to become part of the WWF’s Climate Savers initiative.
     “We are initiating an assessment to identify our reduction opportunities and the measures we can undertake to reduce the carbon intensity of our products and the way we manufacture them. The Climate Savers partnership is an opportunity for us to go beyond regulation and be well prepared for a low-carbon future. This will

benefit both our company and the environment,” says Per Valstorp, senior vice president of Product Supply, Novo Nordisk.
     Installations for energy production at two Novo Nordisk sites in Denmark, Bagsværd and Hillerød are covered by the EU Emission Trading Scheme (ETS), which allocates allowances to emit CO₂. As of 1 January 2005, installations whose CO₂ emissions exceed their allowances will have to purchase additional allowances from the market. Novo Nordisk’s financial exposure to the ETS in the first period (2005–2007) is rather limited. In fact, the company will have a net surplus of allowances during the first ETS period.

Energy efficiency and beyond
Novo Nordisk has a history of successfully optimising energy efficiency. Yet these initiatives have not resulted in an absolute reduction of its CO₂ emissions. A new approach to energy efficiency is re-quired where the focus shifts: from optimising individual components of operations to taking the entire production operations as a whole system. Identifying new energy conservation measures using this approach can reveal opportunities for achieving significant CO₂ reductions, capturing synergies between different measures and obtaining multiple benefits from a single investment. Implementing these potential projects will also require that investments take into account both the financial and environmental benefit, thereby enabling the company to overcome the traditional investment barriers such as pay-back and ROIC.

     Reducing emissions over a 10-year period will also require innovation in the way the company procures energy. In 2004, 82% of Novo Nordisk CO₂ emissions were associated with the external purchase of energy. During 2005, Novo Nordisk will investigate the possibilities of purchasing credible certified electricity from renewable sources and also enter into a dialogue with its utility providers on their fuel choices and emission factors.
     Achieving absolute reductions of CO₂ presents both challenges and opportunities for a rapidly growing company. Given the expected rise in the number of people with diabetes, Novo Nordisk has to expand production to meet this increasing demand. The challenge lies in decoupling the direct link between volume growth and energy use and making energy less carbon intensive. Novo Nordisk’s focus on implementing optimisation measures such as cLEAN™ – lean manufacturing principle – will definitely assist in the process but a more sustained decoupling will require the company to look beyond efficiency. This would include a shift to cleaner fuels, purchase of renewable energy and an even greater emphasis on environmentally sound design and development of future processes and products.

Gene technology saves resources
Novo Nordisk uses gene technology and genetically modified organisms in biomedical research and pharmaceutical production. Safe use of gene technology can benefit both the environment and the financial bottom line. A new insulin production process, NN2000, based on genetic engineering, produces five times higher yield per cell compared to the existing production process.

     This translates into use of fewer raw materials such as sugar, water and energy and less waste per produced unit. In addition, to enhance safe use of gene technology, the NN2000 process has also eliminated the use of antibiotic resistance genes from the yeast cells, thereby reducing the risk of transfer of resistance genes to other organisms. Achieving reductions of CO₂ will require that the company develops and replicates similar processes.
     This increased efficiency directly impacts the financial bottom line. That is the philosophy behind the Environmental Management Accounting used to assess the economic value of natural resources, and the business and financial value of good environmental performance.

Sound product design
Rethinking product design is yet another way to prepare for a low-carbon future. Novo Nordisk recognises that its influence on the environmental impact of its products decreases throughout the product life cycle. Therefore it has initiated a project to systematically embed environmental considerations in discovery, development and major support projects. In 2004 it established an environmental team in the device development area to develop a tool for systematic environmental evaluation of raw materials, components and processes of future devices. This team will work closely with the Environmental Devices and Packaging Group responsible for integrating environmental considerations in Novo Nordisk’s devices and packaging strategies.
     Only by taking such a holistic approach from development to disposal, and systematically undertaking a mix of options, can Novo Nordisk prepare itself for a carbon-constrained future.
    For more information, visit novonordisk.com/annual-report-2004

PERFORMANCE HIGHLIGHTS

Financial performance
In 2004, Novo Nordisk’s sales were 29,031 million Danish kroner (DKK), up 11% from DKK 26,158 million in 2003. Measured in local currencies this is an increase of 15%. Operating profit in 2004 increased by 9% from 2003 to DKK 6,980 million. A lower level of non-recurring income reduced operating margin in 2004 to 24.0% from 24.6% in 2003. Return on invested capital increased by 21% in 2004 from 20% in 2003. The cash to earnings ratio for 2004 ended at 85% up from 80% in 2003. Earnings per share (diluted) increased by 5% in 2004 to DKK 14.83 from DKK 14.15. For more information, see the full discussion on page 41.

Environmental performance
Novo Nordisk continued to produce ‘more with less’ in 2004. The eco-productivity indices, which express the ability to utilise resources effectively, showed an improvement of 7% for water and 8% for energy, and thereby reaching the targets for 2004. The implementation of certified environmental management in Japan is progressing according to plan. Detailed accounts for performance can be found at novonordisk.com/annual-report-2004

Social performance
In 2004 Novo Nordisk created 1,484 new full-time positions, mainly outside Denmark. The year-end number of employees in 2004 was 20,725. The employee turnover rate for 2004 was 7.3%. The frequency of occupational injuries was 5.6 per million working hours, compared to 5.4 in 2003. Detailed accounts for performance can be found at novonordisk.com/annual-report-2004

Three years ago Novo Nordisk’s Board and its courageous shareholders decided to embark on a journey to prevent and treat diabetes in the developing world. This visionary initiative created the World Diabetes Foundation.

In our first three years we have funded over 40 projects promoting treatment, awareness, prevention and education within diabetes care in some of the poorest countries in the world.

Hilda from Dar-es-Salaam in Tanzania is just one of many millions of people in the developing world, whose lives are potentially affected by our work.

We can all be proud of our results so far. We promise to keep up the good work.

Thank you for your support.

Novo Nordisk is pleased to report satisfactory financial results for 2004, in spite of experiencing yet another year with adverse currency exposure. Looking to the future, the increasing demand for the company’s products – especially insulin analogues and NovoSeven^® – underpins our expectations for solid growth in 2005 also.

Business performance and discussion

	Sales in 2004 increased by 15% measured in local currencies. Sales of insulin analogues increased by 84% Sales of NovoSeven® increased by 19% Sales in North America increased by 32%
	Measured in Danish kroner sales increased by 11%.
	Underlying operating profit increased by more than 20%, and measured in Danish kroner operating profit increased by 9% to DKK 6,980 million.
	Net profit increased by 4% to DKK 5,013 million and earnings per share (diluted) increased by 5% to DKK 14.83.
	In 2005, the underlying operating profit is expected to grow by 15% in local currencies. Measured in Danish kroner the growth in operating profit is expected to be around 5%, reflecting a significant, negative currency impact and no major non-recurring income in 2005.

Operating profit increased by 9% to DKK 6,980 million from DKK 6,422 million in 2003, thereby exceeding the expectations for operating profit as expressed earlier in the financial year – despite a more challenging currency environment than anticipated. The main reason for exceeding expectations is better operational performance in terms of stronger sales growth, and improved product mix and lower cost consumption.
     Measured in local currencies and excluding the impact from non-recurring items operating profit increased more than 20% – thereby exceeding the long term financial target of 15%, which formed the basis for the operating profit growth expectations to 2004.
     Reported sales of DKK 29,031 million correspond to a sales growth of 11% over 2003 of DKK 26,158 million. Measured in local currencies sales increased 15%, thereby leaving the negative impact from depreciating foreign exchange rates at 4 percentage points.
     Operating margin for 2004 was realised at 24.0% down from 24.6% in 2003. The lower operating margin reflects both a lower level of non-recurring income as well as a negative impact from depreciating foreign currencies. The foreign exchange rate development has impacted operating margin negatively by approximately 1 percentage point.
     Novo Nordisk continuously hedges the cash flows for the main invoicing currencies to limit the short term negative impact on both earnings and cash flow arising from fluctuations in foreign exchange rates. As a consequence the negative impact from the decreasing value of the foreign exchange rates on operating profit is to a large extent countered by net financial hedging gains. With the

exchange rates prevailing in the beginning of February 2004 it was expected that a net financial income of DKK 250 million would be realised, including Novo Nordisk’s share of the profit & loss from associated companies. As a result of the decreasing value of the US dollar and related currencies, net finance was realised at DKK 477 million in 2004.
     The effective tax rate decreased to 33% from 34% in 2003, net profit increased to DKK 5,013 million up 4% compared to 2003 of DKK 4,833 million. Earnings per share (diluted) thereby increased from DKK 14.15 to DKK 14.83 in 2004, corresponding to a growth of 5%.
     Return on invested capital (ROIC) ended at 21% up from 20% in 2003. A large proportion of Novo Nordisk’s assets are denominated in Danish kroner or Euro and ROIC is very sensitive to fluctuations in foreign exchange rates. An increase in ROIC has been realised despite a continued depreciation in the key foreign exchange rates, especially the US dollar, impacting ROIC negatively by approximately 2 percentage points.
     The cash to earnings ratio for 2004 ended at 85% up from 80% in 2003. The three-year average for cash to earings ratio for 2004 increased from 32.3% in 2003 to 59.0% (see page 98). The free cash flow for 2004 was expected around DKK 3 billion, but was realised at a significantly higher level of DKK 4.3 billion, reflecting the higher realised result for 2004 and a continued reduction in the average number of credit days for trade debtors.

Long-term financial targets
The long-term financial targets of Novo Nordisk were defined and communicated to the stock market in 2001. Below we have illustrated the reported average performance for the five year period 2000–2004 compared to the long-term financial targets:

     The targets were selected to ensure management focus on long-term growth of the business, transformation of results into cash and a significant improvement in return on invested capital. The pursuit of these long-term targets will support the creation of a competitive shareholder return. As demonstrated by the moderate growth in operating profit in 2002, 2003 and 2004, the development in the exchange rates can have significant impact on the reported growth in operating profit in an individual year. In fact, if Novo Nordisk’s main invoicing currencies remain at their current level throughout 2005, it is probable that in 2005 Novo Nordisk will also be unable to meet its 15% operating profit growth target. The company’s view is, however, that the 15% growth target is a realistic target which Novo

Nordisk will be able to meet in most years, based on the performance of the recurring business and assuming that currencies are relatively stable. In other words, the company’s ability to deliver on the target in a particular year will be impacted by significant changes in currency exchange rates or events of a non-recurring nature.

Sales development by segments

Sales increased by 15% measured in local currencies. Growth was realised both within diabetes care and biopharmaceuticals – primarily driven by strategically important products such as the insulin analogues NovoRapid^® and NovoMix^® 30 as well as NovoSeven^®. Sales growth was realised in all regions, with the primary growth driver being North America, constituting 26% of total sales, but also International Operations, constituting 17% of total sales, showed solid growth rates.

Diabetes care
Sales of diabetes care products grew by 15% measured in local currencies compared to 2003 and by 11% measured in Danish kroner to DKK 20,533 million. Novo Nordisk remains the global market leader in diabetes care (insulin and oral antidiabetic products) with an overall market share of 20%.

Insulin analogues, human insulin and insulin-related products
Sales of insulin analogues, human insulin and insulin-related products increased by 14% measured in local currencies and by11% measured in Danish kroner to DKK 18,890 million. All regions contributed to growth both measured in local currencies and in Danish kroner.

     Novo Nordisk is the global leader in the insulin market with a worldwide insulin volume market share of 50%, and within the ana-

logue segment Novo Nordisk continues to gain market share, now holding close to 30% of the world market.

     Sales of insulin analogues increased by 84% measured in local currencies and by 77% in Danish kroner to DKK 4,507 million in 2004. Solid growth rates were realised in all regions, and North America continues to be the primary growth driver. Sales of insulin analogues contribute with 55% of the overall growth in local currencies and now constitute 24% of Novo Nordisk’s total sales of all insulin products.

     Levemir^®, Novo Nordisk’s long-acting insulin analogue, continues to gain market share in Europe and now holds 9% of the market for long-acting insulin analogues, less than a year after introduction in the first market. A continued roll-out of Levemir^® in additional countries in 2005 is expected to underpin the solid development seen in the early launch phase.

Europe
Sales in Europe increased by 6% measured in both local currencies and in Danish kroner, with growth being driven by the portfolio of insulin analogues, including Levemir^®. Growth in insulin sales continues to be negatively impacted by price-focused healthcare reforms in some countries, while insulin sales in Germany in the fourth quarter were positively affected by an acceleration of purchasing by patients, primarily motivated by reimbursement considerations.

North America
Sales in North America increased by 34% in local currencies in 2004 and by 22% measured in Danish kroner. The solid sales growth reflects underlying market growth and market share gains. The increased market share is driven by a solid penetration of the insulin analogues NovoLog^® and NovoLog^® Mix. Novo Nordisk now holds more than one-third of the US insulin market and 20% of the analogue market.

     In December, Novo Nordisk’s US affiliate Novo Nordisk Inc, was again awarded a national contract to provide the US Veterans Administration and Department of Defense (VA/DoD) with human insulin, now also including analogue insulin in both vials and delivery devices. The new contract is initially for one year with an option of prolongation for four additional option years, at the discretion of the VA/DoD. The VA/DoD announced the potential five-year value of the contract at just under USD 250 million.

International Operations
Sales within International Operations increased by 20% in local currencies and by 14% measured in Danish kroner. The key growth driver continues to be sales of human insulin, driven especially by China. However, insulin analogues also continue to add to growth, driven especially by Turkey, and Novo Nordisk remains the overall market leader in the analogue segment in the International Operations region.

Japan & Oceania
Sales in Japan & Oceania increased by 11% in local currencies and by 9% measured in Danish kroner. Growth is primarily due to increased sales of NovoRapid^® and NovoRapid^® Mix 30, supported by a continued conversion from durable to prefilled devices, with Novo Nordisk now holding more than 80% of the prefilled device market.

Oral antidiabetic products
Sales of oral antidiabetic products increased in all regions and in total by 21% measured in local currencies and 15% measured in Danish kroner to DKK 1,643 million, with growth primarily driven by North America but also by International Operations.

Biopharmaceuticals
Sales of biopharmaceutical products increased by 15% in local currencies compared to 2003 and by 11% measured in Danish kroner to DKK 8,498 million.

NovoSeven^®
Sales of NovoSeven^® increased by 19% in local currencies compared to 2003. Measured in Danish kroner sales increased by 13% to DKK 4,359 million, with all regions contributing to growth, but with North America, Europe and International Operations as the major growth drivers. In the fourth quarter, sales were positively affected by a timing-related increase in sales to a number of countries in International Operations.

     The sales growth of NovoSeven^® was driven by several factors in 2004. Due to the high penetration within spontaneous bleeds in congenital inhibitor patients, the predominant part of the growth within the inhibitor segment has been generated by treatment of acquired haemophilia patients and usage of NovoSeven^® in connection with elective surgery. Furthermore, the marketing approval in Europe in the first quarter of 2004 of NovoSeven^® for the control of bleeding in patients with factor VII deficiency and Glanzmann’s thrombasthenia added to growth. Treatment of spontaneous bleeds for congenital inhibitor patients remains the largest area of use. In addition, sales are perceived to have been positively affected by increased investigational use of NovoSeven^® influenced by data from clinical trials from the NovoSeven^® expansion programme.

Growth hormone therapy (Norditropin^® and Norditropin^® SimpleXx^®)
In local currencies sales of Norditropin^® and Norditropin^® SimpleXx^® products increased by 11% compared to 2003. Measured in Danish kroner sales increased by 9% to DKK 2,317 million and were driven

by Europe and North America. The prefilled delivery device NordiFlex^® was launched in Japan and selected European countries during 2004 as well as in the US market in January 2005.
     In Japan, the launch of NordiFlex^® in July 2004 contributed to the positive development in Novo Nordisk’s market share during the second half of 2004; however, the government-mandated reduction in reimbursement prices in April 2004 impacted sales negatively.

Other products
Sales of other products within the biopharmaceuticals segment, which predominantly consists of hormone replacement therapy (HRT) related products, grew by 11% in local currencies and by 7% in Danish kroner to DKK 1,822 million.

     The sales growth in 2004 was positively impacted by the change in July 2003 of the US distribution set-up for Novo Nordisk’s HRT products and by the continued market penetration of the low-dose continuous-combined product Activella^® and the topical oestrogen product Vagifem^®. However, global sales in 2004 were negatively impacted by the overall contraction of the HRT market.

Costs, licence fees and other operating income

The cost of goods sold increased by 9% to DKK 8,050 million, representing a gross margin of 72.3%, an increase from 71.7% in 2003. Gains from an improved product mix as well as productivity increases, totalling slightly above 1 percentage point, were only partially offset by a negative currency impact.
     Total non-production-related costs increased by 9% to DKK 14,576 million. The increase reflects especially costs related to sales and distribution, which increased in line with the growth in sales. The main drivers of sales and distribution costs in 2004 were, respectively, launch activities for Levemir^® in Europe; an increased US sales force, primarily focusing on promotion of insulin products but also related to the changed set-up for HRT products; and costs related to an impairment charge on intangible assets in Brazil.
     As a consequence of the implementation of IFRS 2 ‘Share-based payment’, Novo Nordisk in 2004 expensed costs related to share-based programmes amounting to DKK 104 million. The comparable expense included in the IFRS-based statements for 2003 was DKK 76 million.
     Total costs related to depreciation, amortisation and impairment losses in 2004 were DKK 1,892 million compared to DKK 1,581 million in 2003. The costs for 2004 include DKK 326 million in non-recurring impairment charges, compared to DKK 178 million in 2003.
     Total income related to licence fees and other operating income was DKK 575 million in 2004 compared to DKK 1,036 million in 2003, primarily reflecting a lower level of non-recurring income in 2004.

Net financials and tax

Net financials showed a net income of DKK 477 million in 2004 compared to DKK 954 million in 2003, reflecting a lower level of hedging income in 2004. The foreign exchange hedging gains, primarily related to the hedging of the US dollar, were DKK 663 million compared to DKK 1,195 million in 2003. Foreign exchange hedging gains in the fourth quarter of 2004 were positively impacted by un-

realised gains from the mark-to-market valuation of foreign exchange options, primarily related to the US dollar.
     Novo Nordisk has as per 27 January 2005 hedged expected net cash flows in relation to US dollars, Japanese yen and British pounds for 14, 11 and 8 months, respectively.
     The effective tax rate for 2004 was 33%, down from 34% in 2003, corresponding to a total tax expense of DKK 2,444 million in 2004.

Capital expenditure

Net capital expenditure for property, plant and equipment for 2004 was realised at DKK 3.0 billion, compared to DKK 2.3 billion for 2003. The main investment projects in 2004 were the expansion of purification capacity for Levemir^®, as well as expansion of filling capacity for insulin products, including FlexPen^®.

Free cash flow and financial reserves

Free cash flow for 2004 was realised at DKK 4,278 million compared to DKK 3,846 million for 2003. This is higher than previously anticipated and is primarily related to a reduction in the average number of credit days for trade receivables.
     Novo Nordisk’s financial resources at the end of 2004 were DKK 10.2 billion compared to DKK 11.4 billion in 2003. Included in the financial resources are undrawn committed credit facilities of close to DKK 6.7 billion.

Non-financial performance:
Progress towards sustainability

In managing its business with a Triple Bottom Line approach, Novo Nordisk is linking a set of key targets to sustainability goals. Twenty top-level indicators help track performance over time in regard to environmental, social and socio-economic goals. They relate to six areas of strategic importance: living our values, access to health, our employees, our use of animals, eco-efficiency and compliance, and economic contribution. The indicators have been defined through consultation with stakeholders, while methods of measuring and targets are set by Novo Nordisk’s management. For details and comparative data, see page 50–51 and novonordisk.com/annual-report-2004

Living our values
The employee survey, eVoice, is conducted annually and systematically measures the working climate. This includes a measure of the organisational support for and understanding of responsible business practices. In 2004, the average of respondents’ answers – on a scale from 1–5, with 5 being the highest score – was 4.2. Regular independent facilitations assess compliance with the Novo Nordisk Way of Management. In 2004, 96% of identified corrective actions were accomplished. Performance on these indicators is stable over time and better than targets.
     Novo Nordisk’s commitment to social and environmental good practices extends throughout the supply chain. Suppliers are evaluated with respect to basic labour rights and environmental management. Due to the company’s expanding global production, new sup-

pliers have been introduced to the company and its standards. To focus on key impacts, the triviality limit has been raised. During 2004 suppliers accounting for 20% of the total value of Novo Nordisk’s purchases were evaluated. Of these, 72% reported a satisfactory performance. All suppliers with an unsatisfactory rating receive a feedback letter from Novo Nordisk, and when needed an action plan is agreed upon. In 2004, nine key suppliers were audited, following similar processes as Novo Nordisk’s regular quality audits.

Access to health
Novo Nordisk has built its strategy for improved access to diabetes care on the World Health Organization’s (WHO) key priorities: national healthcare strategies, national healthcare capacity, best possible pricing and additional funding. Novo Nordisk serves around 20% of the global diabetes care market, supplying insulin to 11–13 million people. The global health programmes, providing awareness, education or treatment of diabetes, are reaching out to at least 21 million people.
     The best possible pricing scheme, offered by Novo Nordisk to 49 of the least developed countries (LDCs) in the world, was monitored closely in 2004 to ensure that sales offers were followed up and re-alised purchase prices were at or below the level at 20% of average prices in the industrialised countries. As a result, 33 LDCs chose to buy insulin under this pricing scheme, as compared with 16 LDCs in 2003.

Our employees
Since 2003 efforts to improve health and safety have focused on prevention. As a result, the frequency of occupational injuries per million working hours has gone down; from 8.9 in 2002 to 5.6 in 2004. Regrettably, Novo Nordisk had one fatal accident in 2004 in connection with a social team event. Steps have been taken to ensure that employees’ safety is properly considered before embarking on such activities.
     Employee turnover at Novo Nordisk was 7.3% in 2004, which is satisfactory compared to the industry.

Our use of animals
Novo Nordisk sets goals to reduce, refine and replace animal experiments and to improve animal welfare. Hence, despite a significantly higher research activity in early phases, when animal experimentation is required, the number of animals purchased in 2004 only rose by 10% to 47,311 animals, of which 96% are mice, transgenic mice and rats.
     The goal to totally remove animal test types for biological product control by 2004 had to be postponed until 2005. An FDA approval, obtained in 2004, enables Novo Nordisk to considerably reduce (by approximately 80%) the number of animals used for biological product control in one of the two remaining tests. A 60% reduction in the use of rabbits has already been achieved by the end of 2004. A novel test for glucagon was fully implemented in the third quarter of 2004. The test uses isolated cells in vitro rather than living animals, and rabbits are therefore no longer used for this purpose.

Eco-efficiency and compliance
The 2003–2008 environmental strategy identified eight focus areas, of which climate change has key priority. Novo Nordisk has agreed

to set the goal for absolute reductions of its net CO₂ emission by 2014. The year 2004 will serve as the basis for evaluation of the target achievement.    
     In 2004, CO₂ emissions were 253,000 tons. This is a significant in-crease from previous years. There are two reasons: First, the emission factors from electricity purchased in Denmark have increased by approximately 15%. Secondly, Novo Nordisk no longer purchases green electricity certificates for its site in Kalundborg. The company is currently investigating in detail the renewable energy market, product offerings and the possibilities to purchase credible certified electricity from renewable sources.
     Eco-productivity is a means of measuring the ability to ‘produce more with less’. The medium-term targets for 2001–2005 are a 5% annual improvement in water efficiency and a 4% annual improvement in energy efficiency. In 2004 the achieved improvements were 7% and 8% respectively.
     Compliance with regulatory requirements is a key indicator for the standards of environmental management at local production sites. In 2004, there were 76 breaches of regulatory limits, which is a marked improvement compared with 2003, with a record number of 105.
     In 2004 there were 30 incidents of accidental releases, as compared with 20 in 2003. Immediate measures are taken to mitigate future events, including retraining of personnel. In August 2004, Novo Nordisk had two accidental releases of materials containing genetically modified organisms (GMOs) at the production site in Bagsværd. The affected areas were disinfected immediately, and no harm was done to humans or the environment.
     However, since the goal remains to be zero breaches and zero accidental releases, this performance is not satisfactory. Steps are taken to improve compliance.

Economic contribution
The ‘footprint’ model provides an understanding of Novo Nordisk’s local and global contributions to society. In the reports from the largest production sites, the company’s contribution to socio-economic growth is assessed and quantified. This includes job creation, local taxes paid and local procurement.

Knowledge assets
Being a research driven and knowledge intensive company, knowledge is considered a key asset for further exploration. Novo Nordisk takes a strategic and systematic approach, viewing knowledge from a holistic approach that seeks to balance three perspectives: behaviour/culture, technology/communication and performance economics.
     To ensure progress and report on the knowledge base, knowledge assets are defined as stakeholder resources (employees, customers, relationships and partnerships) and structural resources (technology and processes).
     Novo Nordisk’s exposure to patent expiry is significantly lower than that of industry peers. No major patents expire within a 5-year period. In 2004 Novo Nordisk had a total of 778 active patent families, as compared with 701 in 2003.
     Two key elements of the patent strategy are to raise patent awareness internally, through training and the appointment of

‘patent champions’ in the R&D organisation, and to improve the intellectual asset management.

Research and development update

Diabetes care
In December, Novo Nordisk filed the amended New Drug Application related to Levemir^® with the US regulatory authorities (FDA), and Novo Nordisk expects a US marketing approval around mid-2005, following an expected six months’ review period by the FDA.
     The liraglutide phase 2b study was, as expected, initiated in January 2005 and Novo Nordisk still expects to initiate the phase 3 clinical trial around the turn of the year 2005/6.
     Novo Nordisk and the diabetes business unit of Medtronic Inc entered into an agreement in November, covering the US and Puerto Rico, to develop the world’s first prefilled cartridge for use with Paradigm^®, Medtronic’s external insulin pumps. Prefilled cartridges containing NovoLog^® are expected to offer a convenient treatment option for people using Paradigm^® pump therapy. Novo Nordisk has completed the restructuring transaction with Aradigm Corporation related to the AERx^® insulin Diabetes Management System (iDMS), giving Novo Nordisk full development and manufacturing rights to the programme as of 26 January 2005. Following the fulfilment of closing conditions, including approval by the US competition authorities as well as approval by Aradigm’s shareholders, Novo Nordisk’s wholly-owned affiliate Novo Nordisk Delivery Technologies, Inc now employs approximately 130 former Aradigm employees who have been dedicated to the AERx^® iDMS programme.
     In November, The University of Oxford Diabetes Trials Unit, in collaboration with Novo Nordisk, initiated the 4-T study (Treating To Target in Type 2 Diabetes). The study compares safety and efficacy of three different insulin treatment regimens in patients with type 2 diabetes, who are inadequately controlled with oral antidiabetic agents. The objective of this three-year study is to provide evidence and guidance on ‘how best to treat people with type 2 diabetes with insulin’, with the aim of preventing long-term complications and preserve quality of life. Initial results from the study, which includes approximately 700 patients, are expected during 2006, with final results expected during 2008.

Biopharmaceuticals
Novo Nordisk submitted the regulatory dossier for marketing approval of the use of NovoSeven^® for treatment of blunt trauma to the European Medicines Agency in early January 2005. The application is a supplemental new drug application with an expected six months’ review time. Novo Nordisk still expects to initiate a US trauma trial in the second quarter of 2005. The study is expected to comprise some 600 blunt and penetrating trauma patients.
     Following recent consultations with the FDA, Novo Nordisk expects to initiate a confirmatory clinical trial in the US and Europe as well as in other countries for the use of NovoSeven^® in intracerebral haemorrhage (ICH) mid-2005, involving some 450 patients. Novo Nordisk expects this trial to generate further clinical documentation for filing with the FDA for regulatory approval in the US of NovoSeven^® in connection with ICH. Novo Nordisk still expects to

file an application by mid-2005 for marketing approval in Europe for the use of NovoSeven^® in connection with ICH.
     In November, the Japanese Ministry of Health, Labour and Welfare granted approval of NovoSeven^® for treatment of bleeding episodes in patients with acquired haemophilia, in addition to the existing approval for treatment of congenital haemophilia patients with inhibitors.
     Also in November, Novo Nordisk was granted marketing authori-sation in the US for Norditropin^® for treatment of severe growth hormone deficiency in adults.
     Following analysis of the phase 2 data on the use of human growth hormone in complicated fractures, further clinical development has been discontinued. The phase 2 data showed a significant acceleration of fracture healing; however, pharma-economic analysis did not justify further clinical development. Novo Nordisk will continue to develop human growth hormone for other new therapeutic indications.

Equity

Total equity was DKK 26,504 million at the end of 2004, equal to 70.8% of total assets, compared to 71.7% at the end of 2003.

Proposed dividend

At the Annual General Meeting on 9 March 2005, the Board of Directors will propose a 9% increase in dividend to DKK 4.80 per share of DKK 2, corresponding to a pay-out ratio of 31.8%, compared to 30.8% for the financial year 2003. No dividend will be paid on the company’s holding of own shares.

Treasury shares and share repurchase programme

As per 28 January 2005, Novo Nordisk A/S and its wholly-owned affiliates owned 22,585,129 of its own B shares, corresponding to 6.37% of the total share capital. During 2004, Novo Nordisk purchased 6,480,000 B shares at a cash value of DKK 2 billion, which is in line with the share repurchase programme as announced in April 2004. Novo Nordisk still expects to purchase additional B shares during 2005 equivalent to a cash value of DKK 2 billion, with the remaining shares under the total DKK 5 billion share repurchase programme to be acquired during 2006.

Long-term share-based incentive programme

As from 2004, Novo Nordisk’s Executive Management and Senior Management Board (26 in total) participate in a performance-based incentive programme where Novo Nordisk B shares are annually allocated to a bonus pool when certain predefined business-related targets have been achieved. The annual maximum allocation of shares to the bonus pool is capped at the equivalent of eight months of salary per participant. The shares in the bonus pool are locked up for a three-year period before they are transferred to the executives at the expiry of the three-year lock-up period. Based on an assessment of the economic value generated in 2004 as well as the performance of the R&D portfolio and key sustainability projects, the Board of Directors on 27 January 2005 approved the estab-

lishment of a bonus pool for 2004 by allocating a total of 126,344 Novo Nordisk B shares, corresponding to a cash value of DKK 33.7 million. This allocation amounts to seven months of salary on average per participant.

Audit Committee

The Audit Committee, which was established by the Board of Directors in March 2004, continues to be responsible, on behalf of the Board, for a number of predefined tasks. These include overseeing the internal and external auditors, accounting policies and internal controls, as well as procedures for handling complaints regarding financial reporting matters.

Legal issues

As of 27 January 2005, Novo Nordisk Inc, together with the majority of hormone therapy product manufacturers, is a defendant in 16 product liability lawsuits. Since the initiation of the lawsuits in July 2004, three cases against Novo Nordisk Inc have been dismissed by the courts. Novo Nordisk’s hormone therapy products (Activella^® and Vagifem^®) have been sold and marketed in the US since 2000. Until July 2003, the products were sold and marketed exclusively in the US by Pharmacia & Upjohn Corporation (now Pfizer). The proceedings are in their preliminary stages; however, Novo Nordisk is not expecting the claims to impact Novo Nordisk’s financial outlook.
     In January 2005, Novo Nordisk, Teva and Savient (formerly known as Bio-Technology General) have agreed to a partial settlement of their disputes over human growth hormone (hGH) intellectual property. Under the terms of the agreement, the three parties have granted each other cross-licences to any patents covering the hGH-active ingredient. An appeal of a District Court judgment regarding one portion of the dispute will continue, as will an interference proceeding in the US Patent and Trademark Office. The financial terms of the agreement are not disclosed, but the financial impact has been included in this annual report.

Outlook 2005

Novo Nordisk expects a 10–15 percentage-point growth in sales for 2005 measured in local currencies based on expectations of a strong market for insulin products in general and the continued market penetration of Novo Nordisk’s insulin analogue portfolio, combined with expectations of increasing NovoSeven^® and Norditropin^® SimpleXx^® sales. However, as a consequence of the continued challenging currency environment, primarily related to the US dollar and related currencies, the sales growth measured in Danish kroner is expected to be around 10%.
     For 2005, operating profit growth measured in local currencies and excluding the impact from non-recurring items is expected to be in line with Novo Nordisk’s long-term target of growing operating profit by 15%. Measured in Danish kroner the growth in operating profit is expected to be around 5%, reflecting a significant, negative currency impact and no major non-recurring income in 2005.
     Novo Nordisk expects a net financial expense of DKK 100 million, reflecting:

• a financial income, net of around DKK 100 million (excluding Novo Nordisk’s share of loss & profit in associated companies), primarily related to expected gains from foreign exchange hedging contracts; and

• a negative impact from losses in associated companies of around DKK 200 million, primarily reflecting Novo Nordisk’s share of the expected loss in ZymoGenetics, Inc.

Given the prevailing Danish corporation tax regime, Novo Nordisk expects the tax rate to be 32%, 1 percentage point lower than the tax rate realised for 2004.
     Novo Nordisk plans capital expenditures of close to DKK 4 billion in 2005, primarily related to the construction of production plants for Levemir^® as well as additional filling capacity for insulin products. Capital expenditure will include purchase of fixed assets from Aradigm Corporation of approximately DKK 300 million related to the transfer of the AERx^® iDMS project to Novo Nordisk. Depreciation, amortisation and impairment losses are expected to be around DKK 1.9 billion and the free cash flow to be more than DKK 2 billion.
     All of the above expectations are provided that currency exchange rates remain at the current level for 2005. All other things being equal, movements in key invoicing currencies will impact Novo Nordisk’s operating profit in 2005 as illustrated below. *