- Consolidated sales increased by 17% to DKK 20,924 million; just under 5 percentage points of this increase is due to appreciation of Novo Nordisk's invoicing currencies.
- Health Care sales up 20%.
- Enzyme Business sales up 6%.
- Operating profit for the Group increased by 19% to DKK 4,214 million.
- Operating profit includes restructuring expenses of DKK 350 million; excluding these costs, the increase was 29%.
- Excluding restructuring expenses and Seroxat® licence income the increase was 34%.
- Operating profit for Health Care rose by 39% to DKK 3,150 million (excluding Seroxat® licence income).
- Operating profit for Enzyme Business rose by 14% to DKK 687 million.
- Profit before tax for the Group rose by 6% to DKK 3,951 million, reflecting a net loss on financial items of DKK 263 million compared with net income of DKK 204 million in 1998; net profit remained at the 1998 level at DKK 2,411 million.
- Proposed dividend up 26% from DKK 7.75 to DKK 9.75 per share of DKK 10 (from DKK 3.88 to DKK 4.88 per ADS).
- For the year 2000 the company expects an increase in operating profit at the level of 10%. Adjusted for Seroxat® licence income and restructuring expenses in 1999, the increase is expected to be at the level of 20%.
The Novo Nordisk Group 1999
Operating profit lived up to the Group's long-term growth target of at least 15% and exceeded our own expectations in February 1999 when we announced Novo Nordisk's financial results for 1998. This was primarily due to more favourable exchange rates than anticipated in February 1999, especially JPY and USD against DKK, combined with the fact that the underlying business developed better than expected. Operating profit rose by 19% to DKK 4,214 million despite significant marketing costs and realised and accrued restructuring expenses totalling DKK 350 million in connection with the establishment of Enzyme Business as an independent company.
Operating profit lived up to the Group's long-term growth target of at least 15% and exceeded our own expectations in February 1999 when we announced Novo Nordisk's financial results for 1998. This was primarily due to more favourable exchange rates than anticipated in February 1999, especially JPY and USD against DKK, combined with the fact that the underlying business developed better than expected. Operating profit rose by 19% to DKK 4,214 million despite significant marketing costs and realised and accrued restructuring expenses totalling DKK 350 million in connection with the establishment of Enzyme Business as an independent company.
Operating profit for the Group in 1999, excluding restructuring expenses, increased by 29%.
Operating profit for the Group in 1999, excluding Seroxat® licence income and restructuring expenses, increased by 34%.
Similarly adjusted for these items, the Group's operating profit margin measured as operating profit as a percentage of net turnover, rose from 16.0% to 18.3%.
Profit before tax and net profit were DKK 3,951 million and DKK 2,411 million respectively, equal to an increase of 6% before tax while net profit remained unchanged compared with 1998.
For the two business segments Health Care and Enzyme Business, operating profit increased by 39% and 14% respectively over 1998. The profit margin for Health Care was 19.2% and for Enzyme Business 15.3%, compared with 16.6% and 14.1% respectively in 1998.
Consolidated sales increased by 17% to DKK 20,924 million in 1999 from DKK 17,911 million in 1998. Sales in Health Care increased by 20%, while the increase for Enzyme Business was 6% compared with 1998. The 17% consolidated sales increase was primarily driven by volume gains, improved product mix and favourable movements in the Group's key invoicing currencies.
Measured in local currencies, sales increased by 12% compared with 1998. The average value, measured in DKK, of Novo Nordisk's invoicing currencies was nearly 5% higher in 1999 than in 1998, especially reflecting an appreciation of JPY and USD. The average value of JPY, Novo Nordisk's most important foreign currency, thus increased by 20% against DKK, while USD increased by 4%.
Novo Nordisk's sales in 1999 were not affected to any significant extent by additional customer demand (hoarding) prior to the turn of the year 1999/2000. Therefore only a minor negative effect on sales in the first quarter of 2000 is foreseen.
Total costs, excluding financial expenses and tax, rose by 12% over 1998 to DKK 17,669 million in 1999. The rise reflects increased sales and distribution costs relating to new product launches. In addition, the total costs in 1999 include total restructuring expenses of DKK 350 million.
Production costs rose by 11% to DKK 6,473 million. This increase should be viewed in the context of a 17% increase in Novo Nordisk's turnover. The Group's gross margin rose to 69.1% from 67.3% in 1998. The lower rate of increase in production costs primarily reflects better production yields, especially in Enzyme Business, and a better product mix in Health Care.
Sales and distribution costs rose by 17% to DKK 5,307 million, primarily reflecting a significant increase in costs relating to the launch of new products such as NovoNorm®, NovoSeven®, Activelle(TM), Norditropin® SimpleXx(TM) and NovoRapid(TM).
Research and development costs decreased by 1% to DKK 3,355 million. The decrease mainly reflects that this item in 1998 included major one-off costs relating to the termination of a development project, and that part of the one-off income (net) received in 1998 was invested in a number of selected development projects.
Administrative expenses increased by 6% to DKK 2,184 million.
Total employee costs rose by 9% to DKK 6,562 million. At the end of 1999, the number of employees was 15,184, an increase of 3% compared with 1998.
Total depreciation, which is included in the respective cost items, decreased by 3% to DKK 1,422 million. The decrease is primarily attributable to extra amortisation of goodwill in 1998 in connection with, among other things, the sale of Seroxat® rights in the Nordic countries.
Novo Nordisk's licence fees and other operating income decreased by 35% to DKK 959 million in 1999. Licence fees and other operating income for 1998 included several non-recurrent events. Licence income from Seroxatâ/Paxilâ rose to DKK 726 million in 1999 from DKK 663 million in 1998, an increase of 10%.
Novo Nordisk's net financials for 1999 showed a net loss of DKK 263 million compared with net income of DKK 204 million for 1998, primarily due to a net foreign exchange loss arising from hedging of the Group's currency exposure with respect to JPY.
Taxes expensed in 1999 were DKK 1,540 million, of which DKK 85 million relates to local taxes in connection with the demerger. The effective tax rate has been calculated at 39.0. Adjusted for these local taxes, the tax rate was 36.8 compared with 35.7 in 1998.
Novo Nordisk had a positive free cash flow in 1999 of DKK 1,763 million compared with a positive free cash flow of DKK 1,334 million in 1998. The improvement results primarily from a one-off payment in January 1999 relating to the sale in 1998 of Seroxat® rights in the Nordic countries and an increase in the cash flow from operations.
Shareholders' funds were DKK 18,535 million at the end of 1999 equal to 60% of total assets, compared with 66% in 1998.
Outlook for 2000
In 2000, Novo Nordisk will continue to introduce new Health Care products in new geographical markets, and Enzyme Business will introduce a number of new products for selected industry segments. Against this background, and based on expectations of continued rising sales of the Group's existing products, we expect a satisfactory development in sales of the company's products in 2000 relative to 1999.
In 2000, Novo Nordisk will continue to introduce new Health Care products in new geographical markets, and Enzyme Business will introduce a number of new products for selected industry segments. Against this background, and based on expectations of continued rising sales of the Group's existing products, we expect a satisfactory development in sales of the company's products in 2000 relative to 1999.
At the end of 1999, Novo Nordisk's licence agreement with SmithKline Beecham regarding Seroxat®/Paxil® expired in practically all countries. As a result, licence income from this product in 2000 will be DKK 660-700 million lower than in 1999. In spite of this, and assuming that currency exchange rates remain at current levels for the rest of the year, we expect an increase in operating profit at the level of 10%. Adjusted for Seroxat® licence income and restructuring costs in 1999, the increase is expected to be at the level of 20%.
As per our announcement on 1 February 2000, Novo Nordisk has settled various patent disputes with Eli Lilly. Under the terms of the settlement, Novo Nordisk will receive a one-off payment, which will have a positive impact on operating profit. This is reflected in the forecasts of the year's results.
The development of Novo Nordisk's key invoicing currencies and continued introduction of recent products will be significant factors in relation to the fulfilment of our corporate financial goals for 2000.
The free cash flow for 2000 is expected to develop satisfactorily.
Assuming that current exchange rate levels remain unchanged for the rest of 2000, the impact from net financials is expected to be neutral.
The effective tax rate is expected to be at the level of 37.
Novo Nordisk's capital expenditure for property, plant and equipment is expected to be at the level of DKK 2 billion.
Outlook for the year 2001 and beyond
As announced on previous occasions, the new corporate structure will take effect around the turn of the year 2000/2001. One of the main aims of the separation is to increase the operational freedom and flexibility of the individual companies. When the new structure and new boards of directors in the two companies are in place, the financial goals of each individual company will be determined.
As announced on previous occasions, the new corporate structure will take effect around the turn of the year 2000/2001. One of the main aims of the separation is to increase the operational freedom and flexibility of the individual companies. When the new structure and new boards of directors in the two companies are in place, the financial goals of each individual company will be determined.
Health Care
1999 was a successful year for Health Care.
1999 was a successful year for Health Care.
Operating profit rose by 39% from DKK 2,270 million in 1998 to DKK 3,150 million, both of these figures exclusive of Seroxat® licence income.
The growth in Health Care's operating profit was driven by a 20% sales increase, which generated an improvement in the operating profit margin of just under 3 percentage points. Health Care's performance should be viewed in the context of increased costs in connection with introduction of new products such as NovoNorm®, NovoSeven®, Activelle(TM), Norditropin® SimpleXx(TM) and NovoRapid(TM). Research and development costs remained at the 1998 level, representing 16.7% of sales in 1999 compared with 20.5% in 1998. Health Care's investments in fixed assets were DKK 1.4 billion compared with DKK 1.8 billion in 1998.
Health Care sales rose by 20% to DKK 16,423 million from DKK 13,647 million in 1998. Sales were favourably affected by an increase in the average value of Health Care's invoicing currencies of nearly 5%. Volume and product mix improvements had a favourable impact on sales of 15%, primarily driven by diabetes care and NovoSeven®.
Sales of diabetes care products rose by 20% to DKK 11,777 million in 1999. The increase primarily reflects increased sales of Penfill® 3ml and NovoLet® 3ml supported by increased sales of NovoNorm®/Prandin(TM). Sales in the fourth quarter were adversely affected by repurchase of products in connection with changes at the distributor level.
Introduction of NovoRapid(TM) is proceeding satisfactorily. The product was introduced in seven European countries during 1999.
Sales of insulin products in the US market increased by 23% in 1999, now accounting for 11% of Novo Nordisk's total insulin sales. Measured in USD, the US sales increase was 18%. The favourable development was due to improved product mix, price increases and a general volume increase in the market.
Total sales of NovoNorm®/Prandin(TM) rose to DKK 728 million in 1999 from DKK 240 million in 1998 driven by developments in the US market and the introduction in Europe. The European introduction is still proceeding satisfactorily, although reimbursement is still pending in a number of countries.
Sales of HRT products (hormone replacement therapy) rose by 3% to DKK 1,130 million in 1999. Sales were adversely affected by stock adjustments at the distributor level in the fourth quarter.
As per our announcement on 12 January 2000, Novo Nordisk A/S and Pharmacia & Upjohn Company have signed a licence agreement under which Pharmacia & Upjohn will market Novo Nordisk's portfolio of HRT products in the United States. The agreement covers the three drugs Activelle(TM), Vagifem® and Innofem(TM).
Sales of human growth hormone products (Norditropin®) were DKK 1,721 million, 15% higher than in 1998. Even though the total Japanese market demand for growth hormone was lower than in 1998, Novo Nordisk's sales rose compared with 1998; the reason is that sales in 1998 were adversely affected by the repurchase of products from a former distributor. In addition, sales were favourably affected by the strengthened JPY against DKK.
Sales of NovoSeven® more than doubled in 1999 to DKK 1,313 million from DKK 576 million in 1998. The large sales increase is attributable to the introduction into the US and to continued strong growth in other markets.
Total sales of other Health Care products dropped by 27% to DKK 482 million due to the discontinued Nordic sales of Seroxat®, which was sold to SmithKline Beecham in 1998.
Enzyme Business
1999 was a good year for Enzyme Business.
1999 was a good year for Enzyme Business.
Operating profit was DKK 687 million compared with DKK 603 million in 1998, equal to an increase of 14%, which should be viewed against the background of a 6% sales increase. This performance was supported by improvements in production efficiency and by the fact that other costs grew at lower rates than sales. Research and development costs in Enzyme Business remained at the 1998 level, representing 13.5% of sales compared with 14.2% in 1998. Total investments rose from DKK 403 million to DKK 567 million in 1999.
Enzyme Business sales rose by 6% to DKK 4,501 million in 1999 from DKK 4,264 million in 1998. Measured in local currencies, sales rose by approximately 2% due to a volume increase partially counteracted by slightly falling prices.
Sales of technical enzymes rose by 3% despite falling sales to the textile industry. Enzymes for the food and feed industries are showing fine growth rates; especially sales to the feed industry increased significantly by around 30%.
Sales in Asia, which were badly hit by the economic crisis in 1998, developed favourably in 1999. Sales in Latin America and Central and Eastern Europe continued to be affected by the economic situation in these countries.
Net financials
Novo Nordisk's net financials for 1999 showed a net loss of DKK 263 million compared with net income of DKK 204 million for 1998.
Novo Nordisk's net financials for 1999 showed a net loss of DKK 263 million compared with net income of DKK 204 million for 1998.
The Group posted a net foreign exchange loss of DKK 359 million in 1999 compared with a net foreign exchange gain of DKK 27 million in 1998. The net foreign exchange loss is primarily due to hedging of Novo Nordisk's currency exposure with respect to JPY and USD.
Net interest income decreased from DKK 173 million in 1998 to DKK 114 million in 1999. The decrease is attributable to lower net interest-bearing assets in 1999 than in 1998 mainly reflecting the stock repurchase programme.
Dividend
At the annual general meeting on 23 March 2000, the Board of Directors will propose to raise the dividend for 1999 by 26% to DKK 9.75 (DKK 4.88 per ADS) per share of DKK 10 from DKK 7.75 (DKK 3.88 per ADS) in 1998. Thus the payout ratio for 1999 will be 29%, compared with 23% in 1998. No dividend will be paid on the company's holding of own shares.
At the annual general meeting on 23 March 2000, the Board of Directors will propose to raise the dividend for 1999 by 26% to DKK 9.75 (DKK 4.88 per ADS) per share of DKK 10 from DKK 7.75 (DKK 3.88 per ADS) in 1998. Thus the payout ratio for 1999 will be 29%, compared with 23% in 1998. No dividend will be paid on the company's holding of own shares.
New corporate structure
The process of dividing the Group into two separate companies, Health Care (Novo Nordisk) and Enzyme Business (Novozymes), progressed more quickly than originally planned. The aim is for the new structure to be adopted at an extraordinary general meeting around the turn of the year 2000/2001, to take effect retroactively as from 1 January 2000.
The process of dividing the Group into two separate companies, Health Care (Novo Nordisk) and Enzyme Business (Novozymes), progressed more quickly than originally planned. The aim is for the new structure to be adopted at an extraordinary general meeting around the turn of the year 2000/2001, to take effect retroactively as from 1 January 2000.
Stock repurchase and holding of own shares
As of 31 December 1999, Novo Nordisk's holding of its own shares (treasury shares) was 4,514,059 B shares, representing 5.98% of the total number of shares. During the period 15 January 1999 - 12 April 1999 Novo Nordisk spent approximately DKK 0.9 billion on stock repurchase, thus finalising the programme initiated in 1998 to buy back a total of DKK 3 billion worth of shares. During the period 8 November 1999 - 31 December 1999 the company spent approximately DKK 0.5 billion on stock repurchase as part of the new programme announced on 3 November 1999 to buy back up to DKK 2 billion worth of shares.
As of 31 December 1999, Novo Nordisk's holding of its own shares (treasury shares) was 4,514,059 B shares, representing 5.98% of the total number of shares. During the period 15 January 1999 - 12 April 1999 Novo Nordisk spent approximately DKK 0.9 billion on stock repurchase, thus finalising the programme initiated in 1998 to buy back a total of DKK 3 billion worth of shares. During the period 8 November 1999 - 31 December 1999 the company spent approximately DKK 0.5 billion on stock repurchase as part of the new programme announced on 3 November 1999 to buy back up to DKK 2 billion worth of shares.
Share options
As the corporate financial goals for 1999 were achieved, approximately 400 executives around the world will receive options to buy a total of around 190,000 B shares. The purchase price will be the closing price of the company's B shares on the Copenhagen Stock Exchange on the day after the annual general meeting on 23 March 2000. This commitment will be covered by the company's holding of its own shares.
As the corporate financial goals for 1999 were achieved, approximately 400 executives around the world will receive options to buy a total of around 190,000 B shares. The purchase price will be the closing price of the company's B shares on the Copenhagen Stock Exchange on the day after the annual general meeting on 23 March 2000. This commitment will be covered by the company's holding of its own shares.
The Year 2000 issue
In compliance with regulatory requirements, including those from the US Securities and Exchange Commission, various aspects of the Year 2000 or Y2K issue are reviewed below.
In compliance with regulatory requirements, including those from the US Securities and Exchange Commission, various aspects of the Year 2000 or Y2K issue are reviewed below.
State of readiness:
Novo Nordisk (the Company) initiated a Year 2000 Project in August 1996. The Company made an assessment of all potential significant problems in all internal IT and non-IT (eg embedded chips) systems and remediation and final testing was completed 30 September 1999. As a result of the millennium change, the company has not experienced any significant Year 2000 problems related to its systems.
Novo Nordisk (the Company) initiated a Year 2000 Project in August 1996. The Company made an assessment of all potential significant problems in all internal IT and non-IT (eg embedded chips) systems and remediation and final testing was completed 30 September 1999. As a result of the millennium change, the company has not experienced any significant Year 2000 problems related to its systems.
The Company also identified its critical partners and had a formal correspondence with these parties to determine their Year 2000 status and any probable impact on Novo Nordisk. These critical partners stated that they were or would be ready by 1 January 2000 and as of the date of this report the Company's critical partners have not reported any Year 2000-related disturbances.
Costs to address Year 2000 issues:
Costs incurred by the Company to modify or replace non-compliant systems have not been material. The main components of such costs have been the acceleration of system migrations and application projects.
Costs incurred by the Company to modify or replace non-compliant systems have not been material. The main components of such costs have been the acceleration of system migrations and application projects.
Risks of Year 2000 issues:
The most reasonably likely worst case Year 2000 scenarios were as follows: (i) disruption of non-IT production systems, and/or (ii) temporary interruption in the delivery of supplies and services from sole source vendors to Novo Nordisk (eg water and electricity). No significant issues have until now been experienced.
The most reasonably likely worst case Year 2000 scenarios were as follows: (i) disruption of non-IT production systems, and/or (ii) temporary interruption in the delivery of supplies and services from sole source vendors to Novo Nordisk (eg water and electricity). No significant issues have until now been experienced.
A Year 2000 Risk Analysis of all business critical processes including possible impact from critical partners was done. Y2K contingency plans were developed and plans and procedures for surveillance of critical IT and non-IT systems at the turn of the millennium were in place. Detailed verification of critical components after New Year has not revealed any Year 2000 issues.
The Company evaluated the potential additional patient demand for the Company's products in 1999 and developed several contingency plans. One of the Company's contingency plans was to ensure sufficient stock levels to meet a potential additional patient demand for products. The Company increased production volumes and carefully monitored sales patterns. Although some additional patient demand could be detected in a few markets the impact on sales and stock level has been limited.
Due to the possible risk of a short disruption in utilities (electricity, water etc) supplied by third parties, contingency plans were developed for production plants. As a part of this plan plants were temporarily shut down around the turn of the millennium.
Forward-looking statements
The above sections contain forward-looking statements as the term is defined in the US Private Securities Litigation Reform Act of 1995.
The above sections contain forward-looking statements as the term is defined in the US Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from expectations, including unexpected developments in the international currency exchange and securities markets, government-mandated or market-driven price decreases for Novo Nordisk's products in the company's major markets and the introduction of competing products within Novo Nordisk's core businesses.
These and other risks and uncertainties, are further described in reports filed with the US Securities and Exchange Commission (SEC) by Novo Nordisk and readily available to the public, including the company's Form 20-F, which was filed on 29 June 1999.
In addition to the risk factors described in the company's Form 20-F, the economic situation in Asia, Russia and Latin America could have an adverse impact on unit sales and/or prices, including currency exchange rates, in 2000. The total Group sales in Asia (excluding Japan), Russia and Latin America were approximately DKK 2 billion in 1999 corresponding to 10% of total Group sales.
Annual accounts
The printed version of the annual accounts for 1999, which will be presented at the company's annual general meeting on 23 March 2000, is due on 3 March 2000. However, the Internet version of the annual accounts will be available on the company's homepage at the address: http://investors.novo.dk from 23 February 2000 at 5 pm Copenhagen time.
The printed version of the annual accounts for 1999, which will be presented at the company's annual general meeting on 23 March 2000, is due on 3 March 2000. However, the Internet version of the annual accounts will be available on the company's homepage at the address: http://investors.novo.dk from 23 February 2000 at 5 pm Copenhagen time.
Attachments
Novo Nordisk's profit and loss account, balance sheet, cash flow statement and segmented data for the two business areas are attached as a PDF file to this statement.
Novo Nordisk's profit and loss account, balance sheet, cash flow statement and segmented data for the two business areas are attached as a PDF file to this statement.
Bagsværd, 17 February 2000
The Board of Directors
Novo Nordisk A/S
The Board of Directors
Novo Nordisk A/S
For further information please contact:
Media Investors
Søren Møller Christensen
Tel (direct): (+45) 4442 1207 Michael Steen-Knudsen
Tel (direct): (+45) 4442 6048
Carsten Bøss
Tel (direct): (+45) 4442 6047
Further information on Novo Nordisk is available on the company's Internet homepage at the address: http://www.novo.dk.
Søren Møller Christensen
Tel (direct): (+45) 4442 1207 Michael Steen-Knudsen
Tel (direct): (+45) 4442 6048
Carsten Bøss
Tel (direct): (+45) 4442 6047
Further information on Novo Nordisk is available on the company's Internet homepage at the address: http://www.novo.dk.