RATINGS RATIONALE

"The upgrade to A1 primarily reflects that Novo Nordisk has strengthened its financial profile over recent years, while also maintaining its leadership position in the diabetes care market," says Marie Fischer-Sabatie, a Moody's Vice President - Senior Credit Officer and lead analyst for Novo Nordisk. "The upgrade also reflects that Novo Nordisk has recently passed certain milestones in the regulatory process to bring to the market a new-generation long-acting insulin, degludec, under the brand name Tresiba. We expect Tresiba to help Novo Nordisk further protect and develop its insulin franchise," adds Ms. Fischer-Sabatie.

Moody's positively notes that Tresiba was (1) approved in Japan in September; (2) received a positive opinion from the Committee for Medicinal Products for Human Use in Europe in October; and (3) received positive feedback from the Food and Drug Administration's (FDA) Endocrinologic and Metabolic Drugs Advisory Committee in the US in November. Moody's would expect the drug to be launched during H1 2013 in Japan and certain European markets (reimbursement negotiations are carried out on a country-country basis), while the US approval and launch date is more uncertain.

The final label obtained by Novo Nordisk will be important in determining the sales potential of Tresiba, but Moody's positively notes that Novo Nordisk's product portfolio includes some other sources of growth. These include Victoza, a once-daily glucagon-like peptide-1 agonist (GLP-1) for adults with type 2 diabetes, and its existing insulin analogues, in particular NovoRapid and NovoMix, which we expect to sustain the group's growth in the next two years at least. Moody's also notes that insulin products continue to benefit from high barriers to entry, limiting the risk of generic competition.

Novo Nordisk's A1 rating reflects (1) the group's very strong credit metrics and conservative financial policy; (2) an overall limited exposure to patent expiries in the next two to three years; (3) a solid track record of successfully developing and commercialising new treatments within diabetes; and (4) favourable growth trends for diabetes. The A1 rating also takes into account (1) Novo Nordisk's moderate size; (2) the group's limited diversification; (3) its high exposure to the insulin market and to the potential impact that evolutions and innovations in treatments could have on the franchise; and (4) a certain degree of event risk.

Novo Nordisk has indicated in the past that it may pursue acquisitions if opportunities arise. The current rating allows for a certain amount of financial flexibility for acquisitions, equaling approximately two years of free cash flow (FCF). Nevertheless, if Novo Nordisk were to make an acquisition of this size, Moody's assumes that the group would mitigate the impact of this by scaling back its share buy-back programme.

Novo Nordisk benefits from a strong liquidity profile due to a limited level of debt (DKK1.1 billion, or approximately EUR150 million, as at 30 September 2012), very large cash and marketable securities (totalling DKK17.5 billion, or EUR2.3 billion) and strong FCF generation. In addition, the group has access to a EUR650 million five-year committed credit facility maturing in 2016. This facility does not include financial covenants, but Moody's notes it includes a material adverse change (MAC) clause to be repeated at each drawing.

The stable rating outlook reflects Moody's expectation that the company will maintain its solid cash flow generation and strong balance sheet over the next 18-24 months, underpinned, in particular, by continued growth of its diabetes franchise.

WHAT COULD CHANGE THE RATING UP/DOWN

Moody's would consider upgrading Novo Nordisk's rating to Aa3 if (1) its key diabetes/insulin franchise maintains a leading market position; (2) the group manages to grow in other therapeutic areas and thereby achieve a more balanced profile in terms of segment and product diversification; and (3) it maintains a conservative growth strategy and financial policy.

Conversely, downward pressure on the rating could develop if (1) Novo Nordisk makes a large debt-financed acquisition, resulting in the group's credit metrics deteriorating materially over a prolonged period of time, with, for example, FCF/debt below 40%; (2) the group's share of the insulin market decreases substantially; (3) there are unfavourable developments in terms of generic competition for Novo Nordisk products, such as NovoSeven or NovoRapid, and the group does not mitigate the impact of this with successful pipeline launches; or (4) the group is subject to any litigation that results in significant cash outflows exceeding the equivalent of two years of FCF.

PRINCIPAL METHODOLOGY

The principal methodology used in rating Novo Nordisk A/S was the Global Pharmaceutical Industry Methodology published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Denmark, Novo Nordisk is a global specialist pharmaceutical company. Its core competences are a combination of diabetes care, biopharmaceuticals and expertise in protein delivery systems. In particular, the group has established leadership in diabetes care and insulin delivery systems. Novo Nordisk generated sales of DKK66.3 billion (EUR8.9 billion) during 2011.

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Marie Fischer-Sabatie VP - Senior Credit Officer Corporate Finance Group Moody's France SAS 96 Boulevard Haussmann Paris 75008 France JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Eric de Bodard MD - Corporate Finance Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's France SAS 96 Boulevard Haussmann Paris 75008 France JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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