Sustainable business in Emerging Markets

Jens Pii OlesenHead of Marketing

International Operations

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Agenda How did we begin New opportunities in Pharma ”P” considerations

Portfolio Price Profit Partnerships

Conclusions

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How did it begin?

• Keen founders

• First export in 1933/34

• Production established 1950s

• S. Africa, Algeria, India

• First export market department 1970s

Novo Nordisk International Operations turnover 2010 ~

Novo Nordisk in 1995

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New opportunities in pharmaceuticals

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WW pharmaceutical sales growth70% of growth outside developed markets

$955bn$130bn

$55bn

$765bn

2009E 2014E

Developed Markets

Other Markets

30%

70%

Source: IMS. Developed markets: EU-15, Norway, Switzerland, Iceland; US, Canada, Japan, Australia, New Zealand.

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N-11 some overlap but 7 others…

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“P” considerations

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PortfolioBrands lives long in Emerging Markets

Source: IMS 2009: (BRIC + South Korea, Mexico, Poland, Taiwan, Hungary, Romania, Egypt, Algeria, Saudi Arabia, South Africa, Ukraine, UAE

Branded originals

~$50bn(~28%)

Branded generics

~$90bn(~50%)

Commodity generics

~$10bn (~5%)

~$30bn(~17%)

Total

~$180bn

Patented originals

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PricingPrices are reasonable

Source: IMS 2009: (BRIC + South Korea, Mexico, Poland, Taiwan, Hungary, Romania, Egypt, Algeria, Saudi Arabia, South Africa, Ukraine, UAE

Branded originals

70-100%

Branded generics

50-80%

Commodity generics

Cost+

100%EU prices

Patented originals

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ProfitLower prices are made up by lower costs

69

100

Sources: OM estimation using AZ (72%) and SA (66%) annual reports and IR reports. Pre-R&D operating margin (excluding central costs), indexed to typical established markets. FTE cost analysis: Internal competitor analysis

Typical emerging markets

Typical established markets

People cost index:

US/EU: 100

Brazil: 40

Russia: 30

China: 25

India: 4

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Partnerships

AgencyAgency w

sales force Govt &

Health

authorities

Sales Office Affiliate

Any sales +2m +10m +30m

Input from the “old timers”:

• Partners/People determines success

• Open & honest

• Keep them close

• Incentivise optimal behaviour

• Get rid of bad apples quickly

• Follow up in the market

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Conclusions EMs important for Novo Nordisk future Market choice not always clear Portfolios similar across markets Price fit operating costs Partnerships will be the key to success