Novo Nordisk Annual Report 2021

Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information Novo Nordisk Annual Report 2021 62 Intangible assets Amortisation and impairment losses DKK million 2021 2020 2019 Cost of goods sold 844 369 916 Sales and distribution costs 39 40 24 Research and development costs 744 1,025 522 Administrative costs 11 10 3 Other operating income and expenses 1 2 4 Total amortisation and impairment loss Total amortisation Total impairment losses 1,639 1,446 1,469 1,066 1,096 487 573 350 982 Of the total addition of intangible assets in 2021 DKK 492 million is internally developed (DKK 396 million in 2020). Intangible assets with an indefinite useful life and intangible assets not yet available for use amount to DKK 22,690 million (DKK 9,607 million in 2020), primarily intellectual property rights in relation to research and development projects and goodwill. 2021 additions Additions from acquisition of businesses relates to Novo Nordisk's acquisition of Dicerna Pharmaceuticals, Inc., which primarily includes the RNAi research technology platform and pipeline assets, which are recognised within intellectual property rights and goodwill; please refer to note 5.3. In 2021, Novo Nordisk acquired Prothena's wholly-owned subsidiary Neotope Neuroscience Ltd. and thereby gained full worldwide rights to the intellectual property rights of Prothena's ATTR amyloidosis business and pipeline cover. The acquisition included the clinical stage antibody PRX004. PRX004 is an antibody that uses a depleter mechanism that has the potential to improve heart failure symptoms and reverse the disease progression within the ATTR-CM diseases. The transaction has been accounted for as an asset acquisition recognised in intellectual property rights, all related to PRX004. 2020 additions In 2020, Novo Nordisk acquired Corvidia Therapeutics Inc., in a transaction accounted for as an asset acquisition. An addition of DKK 4,580 million was recognised in intellectual property rights for the acquisition of Ziltivekimab, a fully human monoclonal antibody directed against Interleukin-6 related to chronic kidney disease, which is under development. Novo Nordisk acquired Emisphere Technologies Inc. and obtained ownership of the EligenⓇ SNAC oral delivery technology. Under the terms of the agreement, Novo Nordisk acquired all outstanding shares of Emisphere for USD 1,335 million. As part of the transaction, Novo Nordisk also acquired related Eligen® SNAC royalty stream obligations owed to MHR Fund Management LLC (MHR), the largest shareholder of Emisphere, for USD 450 million. The transaction has been accounted for as an asset acquisition, with DKK 11,060 million recognised in intellectual property rights, of which DKK 2,467 million was related to assets under development. At 31 December 2021, the carrying amount of acquired intangible assets related to Rybelsus is DKK 7,150 million (DKK 7,716 million in 2020), which has a remaining amortisation period of 13 years. Impairment of intangible assets In 2021, an impairment loss of DKK 573 million (DKK 350 million in 2020) was recognised, all related to intellectual property rights. DKK 436 million (DKK 350 million in 2020) of the impairment was related to the Diabetes and Obesity care segment and DKK 137 million (none in 2020) related to Biopharm. The entire impairment loss in 2021 was recognised in research and development costs (DKK 350 million in research and development costs in 2020). The impairment was a result of Management's review of expectations related to intellectual property rights not yet in use. No impairment related to marketable products was identified in 2021 or in 2020. It is assessed that the carrying amount of goodwill which arose from the acquisition of Dicerna Pharmaceuticals, Inc. on 28 December 2021 still reflected the fair value as of 31 December 2021. An impairment test has not been performed on goodwill due to the timing of the acquisition three days before year-end, and no impairment indicators have been identified in the period from the acquisition to 31 December 2021. The allocation of goodwill of DKK 4,346 million to cash-generating units is considered provisional due to the fact that the transaction was closed on 28 December 2021, leaving limited time for determining the cash-generating units. The allocation will be finalised within 12 months from the acquisition date. Accounting policies Goodwill on acquisition of businesses is initially measured at cost, and is subsequently measured at cost less any accumulated impairment losses. Intellectual property rights acquired for research and development projects, are carried at historical cost less accumulated amortisation and any impairment loss. Upfront fees and acquisition costs are capitalised and subsequent milestone payments payable on achievement of a contingent event will be capitalised on the contingent event being probable of being achieved. Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Amortisation is based on the straight-line method over the estimated useful life. This corresponds to the legal duration or the economic useful life depending on which is shorter, and not exceeding 25 years in either case. The amortisation of intellectual property rights begins after regulatory approval has been obtained or when assets are put in use. Goodwill and intangible assets with an indefinite useful life and intangible assets not yet available for use are not subject to amortisation. They are tested annually for impairment, irrespective of whether there is any indication that they may be impaired. The carrying amount of goodwill will within 12 months from acquisition date be allocated to cash-generating units for impairment testing purposes. The allocation is made to those cash- generating units that are expected to benefit from the business combination in which the goodwill arose. The units are identified at the lowest level at which goodwill is monitored for internal management purposes. Internal development of software for internal use is recognised as intangible assets if the recognition criteria are met, for example a significant business system where the expenditure leads to the creation of a durable asset. Amortisation is based on the straight-line method over the estimated useful life of 3-15 years. The amortisation begins when the asset is in the location and condition necessary for it to be capable of operating in the manner intended by Management. Research and development projects Internal and subcontracted research costs are charged in full to the consolidated income statement in the period in which they are incurred. Consistent with industry practice, development costs are also expensed until regulatory approval is obtained or is probable; please refer to note 2.3. Payments to third parties under collaboration and licence agreements are assessed for the substance of their nature. Payments which represent