Novo Nordisk Annual Report 2021
Contents
Introducing Novo Nordisk
Strategic Aspirations
Key risks Management
Consolidated statements
Additional information
Novo Nordisk Annual Report 2021 56
future returns, estimated product returns are recorded as a reduction in
sales. Where shipments of new products are made on a sale-or-return basis,
without sufficient historical experience for estimating sales returns, revenue
is recorded based on estimated demand and acceptance rates for well-
established products with similar market characteristics. If similar market
characteristics do not exist, revenue is recorded when there is evidence
of consumption or when the right of return has expired.
Unsettled rebates are recognised as provisions when the timing or
amount is uncertain (note 3.4).
Where absolute amounts are known, the rebates are recognised as
other liabilities. Wholesaler charge-backs that are absolute are netted
against trade receivable balances.
The impact of foreign currency hedging is recognised in the income
statement in financial items. Please refer to notes 4.3, 4.4 and 4.10 for
more details on hedging.
Key accounting estimates of sales deductions and provisions
for sales rebates
Sales deductions are estimated and provided for at the time the related
sales are recorded. These estimates of unsettled rebate, discount and
product return obligations require use of significant judgement, as not all
conditions are known at the time of sale, for example total sales volume
to a given customer. The estimates are based on analyses of existing
contractual obligations and historical experience. Provisions are calculated
on the basis of a percentage of sales for each product as defined by the
contracts with the various customer groups. Provisions for sales rebates are
adjusted to actual amounts as rebates, discounts and returns are processed.
Revenue can only be recognised to the extent that it is highly probable that a
significant reversal of the recognised revenue will not occur. In determining
the amount of revenue to recognise, Management has considered, among
other factors, whether the consideration is highly susceptible to factors
outside Novo Nordisk's influence, as well as the extent of predictability and
historical experience with similar transactions.
Novo Nordisk considers the provisions established for sales rebates to
be reasonable and appropriate based on currently available information.
However, the actual amount of rebates and discounts may differ from
the amounts estimated by Management as more detailed information
becomes available.
2.2 Segment information
Business segments - Key figures
DKK million
Total net sales
Cost of goods sold
2021
Diabetes and Obesity care
2020
Biopharm
Total
2019
2021
2020
2019
2021
2020
2019
121,597
108,020
102,840
19,203
18,926
19,181
(19,363)
(17,715) (16,309)
(4,295)
(3,217)
(3,779)
140,800
(23,658)
126,946 122,021
(20,932) (20,088)
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income and
expenses
(33,791)
(29,903) (28,729)
(3,217)
(3,025)
(3,094)
(37,008)
(32,928) (31,823)
(15,600)
(3,504)
(13,535) (12,128)
(3,387)
(2,172)
(1,927)
(3,346)
(546)
(571)
(2,092) (17,772)
(661) (4,050)
(15,462) (14,220)
(3,958)
(4,007)
199
264
309
133
196
291
332
460
600
Operating profit
Operating margin
49,538
40.7%
43,744
40.5%
42,637
41.5%
9,106
47.4%
10,382
54.9%
9,846
51.3%
58,644
41.7%
54,126
52,483
42.6%
43.0%
Depreciation, amortisation and
impairment losses expensed
(4,895)
(4,624)
(3,916)
(1,130)
(1,129)
(1,745)
(6,025)
(5,753)
(5,661)
Novo Nordisk operates in two business segments based on therapies:
Diabetes and Obesity care and Biopharm, representing the entirety of the
Group's operations.
The segments include research, development, manufacturing and marketing
of products within the following areas:
Diabetes and Obesity care: insulin, GLP-1 and related delivery
systems, oral antidiabetic products (OAD), obesity and other
serious chronic diseases
Biopharm: Rare blood disorders, rare endocrine disorders and
hormone replacement therapy.
Segment performance is evaluated on the basis of operating profit,
consistent with the consolidated financial statements. Financial income
and expenses and income taxes are managed at Group level and are not
allocated to business segments. There are no sales or other transactions
between the business segments. Costs have been split between business
segments according to a specific allocation. In addition, a small number
of corporate overhead costs are allocated systematically between the
segments. Other operating income and expenses have been allocated to the
two segments based on the same principle.
Accounting policies
Operating segments are reported in a manner consistent with the internal
reporting provided to Executive Management and the Board of Directors.
We consider Executive Management to be the operating decision-making
body, as all significant decisions regarding business development and
direction are taken in this forum.
Geographical areas
Sales to external customers attributed to the US are collectively the most
material to the Group. The US and Mainland China are the only territories
where sales contribute 10% or more of total net sales.
In 2021, Novo Nordisk operated in two main commercial units:
- International Operations
- EMEA: Europe, the Middle East and Africa.
- China: Mainland China, Hong Kong and Taiwan.
- Rest of World: All other countries except for North America.
- North America Operations (the US and Canada).
Refer to note 5.7 for an overview of companies in the Novo Nordisk Group
based on geographical areas.
The country of domicile is Denmark, which is part of EMEA. Denmark is
immaterial to Novo Nordisk's activities in terms of sales as 99.8% of total
sales are realised outside Denmark. Sales are attributed to geographical
areas according to the location of the customer.View entire presentation