Novo Nordisk Annual Report 2021
Contents Introducing Novo Nordisk
Strategic Aspirations
Key risks
Management
Consolidated statements
Additional information.
Novo Nordisk Annual Report 2021 35
Development in costs and operating profit
The cost of goods sold increased by 13% measured in Danish
kroner and by 15% at CER to DKK 23,658 million, resulting in a
gross margin of 83.2% measured in Danish kroner compared
with 83.5% in 2020. The decline in gross margin reflects lower
realised prices in the US, a negative currency impact of 0.2
percentage points and amortisation of intangible assets related
to the acquisition of Emisphere Technologies Inc. in 2020. This
is countered by a positive product mix driven by increased GLP-
1 sales and productivity improvements in line with the strategic
aspiration of driving operational efficiencies.
Sales and distribution costs increased by 12% measured
in Danish kroner and by 15% at CER to DKK 37,008 million.
The increase in costs is driven by International Operations
Operating profit and margin
Operating profit (left axis)
Growth at CER
-
Operating profit margin (right axis)
DKK
billion
%
13%
60
7%
60
6%
5%
3%
50
40
30
20
10
50
10
40
30
20
10
0
0
2017
2018
2019
2020
2021
and North America Operations. In International Operations,
promotional spend is related to launch activities for RybelsusⓇ
and OzempicⓇ as well as Obesity care market development
activities. In North America Operations, the cost increase is
driven by promotional activities for Rybelsus® and OzempicⓇ
as well as market development activities for Obesity care and
launch costs for WegovyⓇ, partially offset by lower promotional
spend related to insulin.
Research and development costs increased by 15% measured
in Danish kroner and by 16% at CER to DKK 17,772 million.
Increased activities within Other serious chronic diseases are
driving the cost increase reflecting the progression of the
pipeline within cardiovascular disease and NASH. The growth
is impacted by amortisation of the priority review voucher for
WegovyⓇ in the US in 2020.
Administration costs increased by 2% measured in Danish
kroner and by 4% at CER to DKK 4,050 million, reflecting low
spend in 2020 due to COVID-19 impact on activities.
Other operating income and expenses (net) was DKK 332
million compared with DKK 460 million in 2020.
Operating profit increased by 8% measured in Danish kroner
and by 13% at CER to DKK 58,644 million.
Financial items (net) and tax
Financial items (net) showed a net gain of DKK 436 million
compared with a net loss of DKK 996 million in 2020.
In line with Novo Nordisk's treasury policy, the most significant
foreign exchange risks for Novo Nordisk have been hedged,
primarily through foreign exchange forward contracts. The
foreign exchange result was a net gain of DKK 344 million
compared with a net loss of DKK 747 million in 2020. This
reflects gains on hedged currencies, primarily the US dollar.
As per the end of December 2021, a negative market value of
financial contracts of approximately DKK 1.7 billion has been
deferred for recognition in 2022.
The effective tax rate is 19.2% in 2021 compared with an
effective tax rate of 20.7% in 2020, mainly reflecting non-
recurring impact from acquisitions in 2020 and 2021.
Net profit increased by 13% to DKK 47,757 million and diluted
earnings per share increased by 15% to DKK 20.74 DKK.
Cash flow and capital allocation
Free cash flow was DKK 29.3 billion compared with DKK 28.6
billion in 2020 supporting the strategic aspiration to deliver
attractive capital allocation to shareholders. The increase is
driven by higher net profit and higher provisions for rebates
in the US partially driven by changed distribution policy for the
340B programme. This increase is partially countered by an
unfavourable impact from change in working capital.
Capital expenditure for property, plant and equipment was DKK
6.3 billion compared with DKK 5.8 billion in 2020.
Novo Nordisk's financial reserves were DKK 16.1 billion by
end of December 2021 comprising cash at bank, marketable
securities (measured at fair value based on active market data)
and undrawn credit facilities less overdrafts and loans repayable
within 12 months.View entire presentation