Novo Nordisk Valuation

Danish multinational healthcare company (1923)

$33 B of market capitalization

November, 12th 2008

Profile2007 Diabetes

careBiopharmaceuticals

Revenues contribution

73% 27%

Revenues growth 9.4% 4.4%

Operating profit contribution

48% 52%

Operating margin 14% 41%

Leader in the global insulin market (Diabetes care) with 52% of world market share.

Leading positions in: insulin delivery systems, homeostasis management and hormone replacement therapies.

R&D expenses= 21% of revenues in 2007 (17% in average).

Focus on Diabetes care, haemostatic agents, hormone replacement, growth disorder, obesity and inflammation therapies.

2 new diabetes due on early 2009, more efficient than their competitors:

•more predicable results, •weight lost, •3 injections per week instead of one per day.

=> Good pipeline.

R&P Pipeline

StrategyFocus on patented modern insulin: barriers to

competition from generics Explore opportunities in pre-diabetes (obesity).

Partnerships with Universities and Biotechnologies companies.

Increase of investments in Biopharmaceutical companiesBuild presence on inflammatory diseases

Expand presence in North America, Brazil, China, India.

3

ManagementDanish Team promoted from Novo Nordisk since 2000: significant

increase in capital invested, sales and profitability => credibility.

Focus on sciences (R&D), finance and marketing.Expertise in the healthcare sector.

Alignment with shareholders : 25% of insiders ownership + stock options.

Board of directors: 11 skilled members, 4 of whom are executives.

CompetitorsMain direct competitors: Sanofi-Aventis then Eli Lilly and

Wyeth. Generic competition in Human insulin but move towards a

patent-protected modern insulin.High profitability and efficiency for Novo Nordisk.Better anti-diabetes drugs

4

Product Growth

•World insulin market growth 6% in volume and 19% in USD. •Novo Nordisk’s market share: 52%.

In local currency, Biopharmaceuticals growth of 12% and Diabetes Care growth of 17% (share of growth 75%) .

Modern insulins growth 29% and 75% of share of Growth. Increasing market share , 45% in 2008.

Geographic Growth•USA: growth of 18%, 47% of share of growth and 56% of market share.

•International growth 21% and 29% share of growth.•Novo Nordisk’s market share: 59%.•China 50% growth driver in International operations, penetration rate: 5%.

=> Combination of fast growing market, market share increase and leading positions in promising markets: China, Brazil, India and modern insulins.

5

Profitability

Gross profit margin= 77%

Increasing operating profit (30% Q3 08)

ROIC= 22%

6

Good profitability & increase of operating profit margin and ROIC thanks to productivity gains.

Financial conditionDebt/ Assets ratio= 26%ICR= 34.86Debt maturing 48% in 2011 (USD) and 52% after

2016 (EUR) Undrawn committed credit of $1.5 bn

Current ratio= 2.28, Quick ratio 1.38Important amount of cash (9% of adjusted assets)Operating cash flow= $2.08 billion

Low financial risks, flexibility and options6.5

RisksSanofi Aventis.Rising cost of R&D and discontinuations of drugs’

development.Pricing competition from generics in human

insulins.Currency risks (but hedging).

Modest financial risk profile & Predicable cash flows

Low exposure to patent expirations. 0.26% of Default within 5 years (Merton model).S&P A, Moody’s A2.7

Historical TRS & Volatility

Cumulative log return

Volatility

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Valuation (base case)

V= 3.74

Valuation (unlikely stress case)Decrease of ROIC from 23% to 21% during phase 2.Decrease of sales from 7% to 3% in phase 1, and from

13% to 10% in phase 2.Decrease of capital efficiency by 50 basis points.Phase 1= 2 years of recession instead of one.

Price= $51Undervalued by 2%.

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Recommandation

Buy shares to take advantage of the:leading positions in high growth segments,undervalued stock,high profitability,good financial condition.

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Last minute updateStock price: 47.13 => undervalued by 42% and 7%.Exchange rate USD/DKK: 5.96$400 M of investment in a new insulin production plant in China