Slide 1 Region China overview and strategy Camilla Sylvest SVP Region China TEAM NOVO NORDISK Professional cycling team
Slide 2 Forward-looking statements Novo Nordisk s reports filed with or furnished to the US Securities and Exchange Commission (SEC), as well as the company s Annual Report 2014 and Form 20-F, both filed with the SEC in February 2015, and presentations made, written information released, or oral statements made, to the public in the future by or on behalf of Novo Nordisk, may contain forward-looking statements. Words such as believe, expect, may, will, plan, strategy, prospect, foresee, estimate, project, anticipate, can, intend, target and other words and terms of similar meaning in connection with any discussion of future operating or financial performance identify forward-looking statements. Examples of such forward-looking statements include, but are not limited to: Statements of targets, plans, objectives or goals for future operations, including those related to Novo Nordisk s products, product research, product development, product introductions and product approvals as well as cooperation in relation thereto Statements containing projections of or targets for revenues, costs, income (or loss), earnings per share, capital expenditures, dividends, capital structure, net financials and other financial measures Statements regarding future economic performance, future actions and outcome of contingencies such as legal proceedings, and Statements regarding the assumptions underlying or relating to such statements. These statements are based on current plans, estimates and projections. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific. Novo Nordisk cautions that a number of important factors, including those described in this presentation, could cause actual results to differ materially from those contemplated in any forward-looking statements. Factors that may affect future results include, but are not limited to, global as well as local political and economic conditions, including interest rate and currency exchange rate fluctuations, delay or failure of projects related to research and/or development, unplanned loss of patents, interruptions of supplies and production, product recall, unexpected contract breaches or terminations, government-mandated or market-driven price decreases for Novo Nordisk s products, introduction of competing products, reliance on information technology, Novo Nordisk s ability to successfully market current and new products, exposure to product liability and legal proceedings and investigations, changes in governmental laws and related interpretation thereof, including on reimbursement, intellectual property protection and regulatory controls on testing, approval, manufacturing and marketing, perceived or actual failure to adhere to ethical marketing practices, investments in and divestitures of domestic and foreign companies, unexpected growth in costs and expenses, failure to recruit and retain the right employees, and failure to maintain a culture of compliance. Please also refer to the overview of risk factors in Be aware of the risk on p 42-43 of the Annual Report 2014 on the company s website novonordisk.com. Unless required by law, Novo Nordisk is under no duty and undertakes no obligation to update or revise any forward-looking statement after the distribution of this presentation, whether as a result of new information, future events or otherwise. Important drug information Victoza (liraglutide 1.2 mg & 1.8 mg) is approved for the management of type 2 diabetes only Saxenda (liraglutide 3 mg) is approved in the US and EU for the treatment of obesity only
Growth target Economic theme Capital Markets Day 2015 Slide 3 China is adopting the new normal of mature growth 13 th Five-Year Plan focusing on mature growth 11 th Five-Year Plan (2006-2010) Achieve rapid economic growth Double GDP cap by 2010 (vs 2000) Speed of growth 12 th Five-Year Plan (2011-2015) Transform with sustainable and balanced growth Maintain GDP growth at 7-8% 13 th Five-Year Plan (2016-2020) Adapt to the New Normal of mature growth Double GDP cap by 2021 (vs 2010) Quality and sustainability GDP growth historically and estimated GDP China US Europe growth (%) 14% 12% 1 8% 6.4% 6% 4% 2.5% 2% 1.8% -2% 2010 2018 Source: China Five-Year Plan Source: OECD Statistics
Slide 4 The importance of China s pharma market is still increasing 2008 Rank Country Index 1 United States 100 2 Japan 27 3 China 14 4 France 13 5 Germany 13 6 Italy 8 7 Canada 7 8 United Kingdom 7 9 Spain 7 10 Brazil 5 11 Mexico 4 12 Australia 4 13 Russia 3 14 South Korea 3 15 Turkey 3 16 India 3 17 Greece 2 18 Netherlands 2 19 Poland 2 20 Belgium 2 2013 Rank Country Index 1 United States 100 2 China 29 3 Japan 26 4 Germany 14 5 France 11 6 Brazil 9 7 Italy 8 8 United Kingdom 8 9 Spain 7 10 Canada 6 11 Russia 6 12 Mexico 5 13 India 4 14 Australia 4 15 South Korea 4 16 Argentina 4 17 Poland 2 18 Turkey 2 19 Belgium 2 20 Netherlands 2 2018 Rank Country Index 1 United States 100 2 China 36 3 Japan 22 4 Brazil 12 5 Germany 11 6 France 8 7 United Kingdom 7 8 Italy 7 9 Canada 5 10 Russia 5 11 India 5 12 Spain 5 13 Mexico 4 14 South Korea 3 15 Australia 3 16 Turkey 2 17 Saudi Arabia 2 18 Poland 2 19 Argentina 2 20 Indonesia 2 Source: IMS Health Market Prognosis, November 2014. Market size ranking in constant exchange rates
Slide 5 The diabetes prevalence in China is expected to continue growing and people with diabetes remain poorly controlled Continued growth in number of people with diabetes Few Chinese patients reach treatment target People with diabetes (million) 160 151 140 120 110 100 80 60 40 20 0 2000 2003 2006 2009 2011 2013 2015 2040E Category 1 Share of people with diabetes (%) 100 80 60 40 20 0 37% 23% Diabetes Diagnosed Drug treated 1 Adequate glycaemic control Source: IDF Diabetes Atlas edition 1-7, year 2000-2015, respectively Source: Prevalence and Control of Diabetes in Chinese Adults, JAMA, September 2013
Slide 6 Increasing focus on quality enhancement and cost containment Cost Cost Cost Access Quality Access Quality Access Quality Focus of 2009-11 Current focus Ongoing focus Phase I: Broad insurance coverage and equal access to health care Phase II: Cost containment Phase III: Quality of healthcare, efficiency and innovation Source: Framework adapted from BCG analysis
Slide 7 Access to health care driven by increased government spending Phase I: Focus on access to healthcare by broad coverage Estimated source of funding Out of pocket Public funding Government funding Health care spend per capita (USD) Cost Access Quality Focus of 2009-11 Key objectivesrowing GDP Investment Phase I: of Broad more insurance than USD 130 coverage billion Basic and coverage equal access to reach to >95% health care; Establish ~130bnUSD basic healthcare government system Establish investment EDL system 10 75% 5 25% 93 210 372 17% 27% 3 29% 35% 36% 54% 37% 34% 2004 2009 2013 EDL: Essential Drug List Sources: China Health Statistics Yearbook (2014), National Health and Family Planning Commission of China
Slide 8 Drug prices will be subject to multiple reviews but pricing remains attractive Phase II: Cost containment Drug prices reviewed on Central, Provincial, City and Hospital level Cost Patent/ exclusive drugs Drugs with high sales value Other drugs NRDL/PRDL drugs Access Quality Current focus Key objectivesrowing GDP Push for Phase more rationalised II: Cost containment drug supply Reduce hospital reliance on drug sales Stricter compliance requirements Central/ Provincial price negotiation Provincial bidding City 2 nd bidding 1 Hospital negotiation 2 Entering Hospital Hospital negotiation Reimbursement pricing 1 Policies are still being developed and not fully in place 2 Without regional policy support NRDL: National Reimbursement Drug List; PRDL: Provincial Reimbursement Drug List
Slide 9 Focus on quality of healthcare, innovative products and faster access to market Phase III: Quality of healthcare, efficiency and innovation Historically, China has been slow in adopting new treatment options Cost Access Quality Ongoing focus Key objectives:ently ~5.8% of outgrowing GDP Enhance drug Phase quality III: and Healthcare encourage quality, innovation Encourage efficiency private investments and innovation Encourage private health insurance NMEs available in 2013 1 180 160 140 120 100 80 60 40 20 0 Global USA Germany UK Canada South Korea China India 1 New Molecular Entities (NMEs) from 2008-12 availability as of 2013 Source: IMS Health
Slide 10 The regulatory environment is rapidly changing with implications for all pharma companies in China Macro social environment Rules and enforcement Implication Anti-corruption campaign driven by president Xi 9-bans Blacklist rule RDPAC Corruption cases AIC investigations Access to hospitals Medical promotion RDPAC: R&D Based Pharmaceutical Association Committee; AIC: Administration for Industry and Commerce
Slide 11 Novo Nordisk has invested in changing diabetes in Region China for more than 20 years Region China historic revenue development Region China historic development DKK billion 10 8 6 4 CAGR 1 +22.9% 7.9 Novo Nordisk China established in 1994 Largest diabetes sales force in China Approximately 2,800 FTEs Tianjin factory established in 1997 Manufacturing of NovoPen and filling of devices Expanded in 2003 and 2008 Approximately 1,000 FTEs 2 0 2005 2014 Research centre established in 2002 Focus on discovery technology, discovery biology, E.coli research and mini-pilot Expanded in 2012 Approximately 200 FTEs 1 CAGR for 9-year period Note: Revenue in constant exchange rates FTE: full-time employee equivalents
Slide 12 Novo Nordisk China sales force is divided into nine regions covering all key provinces Sales organisation divided into nine regions covering 31 provinces CSC NCH CCH ECH SEC NEC BCH WCH SCH Largest cities cover 2 of the population, but ~5 of the diabetes market #of cities Share of population Share of diabetes market Diabetes market growth rate Big cities ~30 ~2 51% 7% Rest of China - ~8 49% 12%
Slide 13 Novo Nordisk s commercial activities are tailored to city segmentation Segment 1 Big cities Initiatives leveraged to cater for different city segments Positioning Strengthen leading position Initiatives New product launches Product upgrade initiatives High level academic meetings New patient capture Sales Reps ~1,000 Segment 2 Smaller cities Strengthen leading position Training healthcare professionals Patient education Meeting-the-expert program improving patient treatment ~300 Segment 3 Counties Educate, expand presence and stay ahead Diagnosis and treatment e-education Mentor program Improving diabetes awareness ~500
Slide 14 The Chinese pharma market has displayed a significant slowdown in growth across all therapy areas Total pharma Total diabetes care Total insulin Market growth Market growth Market growth 6 6 6 5 5 5 4 4 4 3 3 3 2 1 5.5% 2 1 9.4% 2 1 9.8% 2008 2015 YTD 2008 2015 YTD 2008 2015 YTD Source: IMS CHPA Data, September 2015 Note: Data is sensitive to changes in IMS data collection and reporting methodology
Slide 15 Novo Nordisk maintains overall market leadership despite changing market dynamics Value MS (%) 4 Total diabetes market share Novo Nordisk Sanofi BJ Ganli Bayer Tonghua Dongbao Eli Lilly BMS Other Value MS (%) 10 Total diabetes market value by product categories Animal insulin Human insulin Modern insulin OAD DPP-IV GLP-1 3 33% 8 34% 2 6 4 17% 1 2 46% Dec 2012 Sep 2015 Dec 2012 Sep 2015 Source: IMS MAT monthly September 2015 value figures OAD: oral anti-diabetic Source: IMS MAT monthly September 2015 value figures
Slide 16 The human insulin market is dominated by premix insulin Volume MS (%) 10 8 6 4 2 Human insulin market breakdown by insulin segment Dec 2012 Fast-acting (1) Long-acting (7%) Premix (83%) Sep 2015 Novo Nordisk is the clear market leader within human insulin despite intensified competition Volume MS (%) 7 6 5 4 3 2 1 Dec 2012 Novo Nordisk Tonghua Dongbao HK Union Eli Lilly Bayer 61% 19% 15% 3% Sep 2015 Source: IMS MAT monthly September 2015 volume figures Source: IMS MAT monthly September 2015 volume figures
Slide 17 The modern insulin market is gradually shifting towards increasing long-acting insulin usage Volume MS (%) 10 8 6 4 2 Modern insulin market breakdown by insulin segment Fast-acting (18%) Long-acting (24%) Premix (58%) Volume growth (%) 5 4 3 2 1 Long-acting insulin growth outpaces the overall modern insulin market growth Long-acting Modern insulin Fast-acting Premix 24% 2 15% 11% Dec 2012 Sep 2015 Sep 2013 Sep 2015 Source: IMS MAT monthly September 2015 volume figures Source: IMS MAT monthly September 2015 volume figures
Slide 18 Innovation and market access are key to future growth Policy changes expected to lead to faster access for key Novo Nordisk products China is currently reforming the Evaluation and Approval System for Drugs and Medical Devices 1 Accelerate drug registration process Eliminate the drug-application backlog Improve drug quality Expected timelines for key products Phase 3 Regulatory review Reimbursement Key objectives for Novo Nordisk in the coming years: Improve Victoza reimbursement status Obtain Tresiba approval after filing in August 2015 Complete phase 3 trial with Ryzodeg and prepare file 2015 2016 2017 2018 2019 2020 2020+ 1 State Council Document 2015 No.44-18 August 2015
Slide 19 Concluding remarks Key challenges Key opportunities Growth in GDP and growth in health care spend coming down Prices under pressure with possible price erosion in the coming years Increased competition in diabetes from both international and local competitors Basal modern insulin market growing faster than modern insulin premix market GDP growth of 6-7% attractive on a global scale Insulin volume growth of 5-7%, 110 million people with diabetes hereof 70 million not diagnosed High unexploited insulinisation potential and significant value upgrade potential Attractive insulin prices despite ongoing reforms Increase presence in basal segment with Levemir and Tresiba approval