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Novo Annual Review 2016
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management report
2016
f or the annual accounts and review of
2016
and going forward,
novo
a/s has made a number of adjustments to improve the quality of its financial reporting.
novo
a/s will now present the components of its holding and investment results in three categories: the
novo
group (
novo
nordisk,
novo
zymes and nnit), life science
investments
and financial
investments
. this adjustment will enhance the visibility of the performance of each individual area. furthermore, while the annual accounts and the review present the income statement and assets for the single year
2016
, they are less representative of
novo
a/s? long-term investment performance. the main reason for this is that
novo
a/s is a holding and investment company, as opposed to an operating company.
novo
a/s makes
investments
with a view to long-term returns, and we use internal rate of return (irr) as our return measure for life science
investments
and time- weighted rate of return (twr) as our return measure for financial
investments
. we have added a short section to the management report that provides an insight into
novo
a/s? long-term value creation and investment performance. long-term value creation and performance given the inherent long-term nature of
novo
a/s? equity stakes in the
novo
group companies, we measure the performance of the
novo
group in terms of dividends received and proceeds from the sale of any shares into the companies? share buy-back programmes.
novo
a/s? life science
investments
and financial
investments
(together the ?investment portfolio?) are largely held on a long- term or evergreen basis, and the returns over an extended period are what drives our investment decision process. therefore, the performance of the investment portfolio is assessed on the basis of its ongoing return. we consider the irr and twr as the appropriate measures for the performance of the investment portfolio, as they compare the value of
investments
to the entry price (plus any cash in- or out-flow associated with the
investments
). the performance analyses are updated internally on a quarterly basis and will be presented externally on an annual basis, as illustrated below as of year-end
2016
. for the sake of completion and comparison, the results for
2016
and 2015 are also included in the chart below. as a leading global life science investor,
novo
a/s aims to deliver long-term competitive returns and compares its performance to relevant benchmarks, as for example the msci world, msci health care and other relevant indices.
2016
results driven by returns from the
novo
group the income and investment return for
2016
amounted to dkk 8.4 billion, versus a record dkk 15.8 billion in 2015. this development is largely attributed to the negative return for life science
investments
. in contrast, income from the
novo
group increased to the highest level ever in
2016
, and financial
investments
yielded a similar return as in 2015. all
novo
group companies continued to increase profits and dividend pay-outs, resulting in an increase of the total contribution from the
novo
group to dkk 7.1 billion, versus dkk 4.3 billion in 2015, corresponding to an increase of 67%. in
2016
,
novo
nordisk paid its annual dividend in connection with the annual general meeting (agm) in march
2016
. moreover, in
2016
novo
nordisk decided to introduce an interim dividend pay-out which was paid in august
2016
. due to
novo
nordisk?s introduction of an interim dividend in
2016
,
novo
benefited from an increase in dividends received. going forward,
novo
nordisk will pay dividends twice annually: an interim dividend in connection with the first half-year report in august, and a final dividend in connection with the agm in march. in
2016
, return from life science
investments
was adversely affected by the decrease in the values of chr. hansen holding a/s and ophthotech corp., as well as the overall drop in share prices in the life science sector, as illustrated by the msci world pharmaceuticals biotechnology & life sciences index, which recorded a decrease of around 7%
2016
2015 last 5 years last 10 years income from
novo
group (bn dkk) 7.1 4.3 - - return on life science
investments
? irr (%) -4% 35% 21% 16% return on financial
investments
? twr (%) 8% 11% 11% 8% note: all returns are in dkk and reflect total returns, excluding internal cost. return on financial
investments
pertain to the liquid assets in the portfolio. 11 management report
novo-investments-dkk-12.html
