Presentation - Novozymes

R&D IN NOVOZYMESPer Falholt, EVP and Chief Science OfficerDanske Markets Winter Seminar, November 28, 2012

Safe Harbor StatementThis presentation and its related commentscontain forward-looking statements, includingfinancial expectations.Forward-looking statements are by their verynature associated with risks and uncertaintiesthat may cause actual results to differmaterially from expectations.The uncertainties may include unexpecteddevelopments in the international currencyexchange and securities markets, marketdrivenprice decreases for Novozymes’products, and the introduction of competingproducts in Novozymes’ core areas.2

Novozymes –The World Leader in Bioinnovation• Business consists of two segments:Enzyme Business and BioBusiness• 2011 sales: DKK 10,510 millionFounded 1925Listed 2000• 2011 EBIT margin: 22.3%TickerNZYM B• More than 700 products used in 130countries in over 40 different industriesExchangeCopenhagenMarket Cap (MDKK)* ~ 50,000• ~ 7,000 granted and pending patents• + 5,800 employees• Two share classes; A and B shares• A share capital and 11% of B shares(25.5% of O/S; 70.1% of votes) held byNovo A/S, the management company ofthe Novo Nordisk FoundationEnzyme BusinessBioBusinessHouseholdCareFood &BeveragesBioenergyFeed &other Tech.MicroorganismsBiopharma*A+B shares November, 20123

Delivering Tomorrow’s Solutions TodayDelivering solutions fromnature:food applications, detergents,pharmaceutical products, theenergy sector and countless otherapplicationsHelping companiesbecome more efficient:energy efficiency, saving rawmaterials, reducing waste andreplacing chemicalsThis unique approachleads to:“more with less”higher quality, lower costs, betteryields and a better environment4

Uniquely Diversified Group Creates Synergies andNew Opportunities• Unique biotech-focused business with a strong legacy of delivering growth, earnings, and cash flow• Global provider of enzymes to all market segments creates global market leader position• Leveraging competencies across segments accelerates pace of innovation, reduces competition and createshigh barriers to entryHouseholdCareFood &BeveragesBioenergyFeed & otherTechnicalMicroorganismsBiopharma• Laundry &Dishwasherdetergents• Baking• Brewing• Starch tosyrups• Wine & juice• Corn ethanol• Cellulosicbiofuels• Animal feed• Textile• Leather• Pulp & Paper• BioAgriculture• Wastewater• Cleaning• Drug delivery &formulation• Medical devices31% 29% 17%13% 7%3%Enzyme BusinessBioBusiness5

Facts about Novozymes’ R&D• Strong pursuit of new biotechnology,14% of turnover spent on R&DR&D Expenditure 2007−2011(DKK million)R&D DKKmR&D/Sales• ~7,000 pending and issued patents• 5 th most patent-active companyglobally in biotech and health care(2002−2006). The only Europeancompany on the top 40 list.• > 1,300 dedicated employees atresearch sites in Brazil, China,Denmark, India, Japan, the UK andthe US. ~ 22% of Novozymes’ globalworkforce20%18%16%14%12%1,6001,4001,2001,00080060040020010%2007 2008 2009 2010 201106

R&D ManagementPer FalholtCSOEjner Bech-JensenMolecularBiotechnology+ NZ Davis, NZJapan, NZ IndiaClaus CroneFuglsangBioenergy+ NZ DavisChristel TheaJorgensenApplied discoveryFood & Bev., Feed &Other technicalErik GormsenApplied DiscoveryHousehold Care+ R&D ChinaOle KirkStrategic R&DNickie SpieleGlobal R&D SupportThomas SchaeferThe InnovationOfficeMicrobialBiotechnology7

R&D on the Geographical Map- Global Competence Centers> 300 Employees• Strain discovery• Protein Engineering• Biofuel• Biomass• Renewable chemicals• New industries• Microorganisms• Bioag• Patent and Regulatory< 50 employees• Pharma center• Albumin and albufusion• Patent and Regulatory> 600 employees• All basic technologies• All applicationtechnologies excepttextile• Patent and Regulatory< 50 employees• Strain development• Protein Engineering• New applications• Regulatory< 50 employees• Biofuel> 50 employees• Protein Engineering• Application development• Surface fermentation> 150 employees• Fungal screening• New applications• Detergents• Textiles• Biomass• Patent and Regulatory8

R&D Organization:The Product Discovery and Development Process*MolecularBiotechnologyApplied DiscoveryDevelopment• Protein Engineering• High throughputscreening• Assay development• Assays• Protein Chemistry• Application tests• Customer tests• Strain development• Pilot plant (DPQ)• Safety & Toxicology• RegulatoryPatents & RegulatoryProject Management* Illustrates a typical flow from Proof of Concept to Sales.9

From Gene-bank to ProductIndividual shufflingFamily shufflingBioinformaticsTechnologiesMega libraries (int. and ext.)Protein EngineeringScreening technology• High throughput screening: microbialand molecular level• Targeted assayCreating BiologicalDiversity1° Screening2° ScreeningCreatingExpressionProcessNature’s diversityMolecular evolutionExpression (bacterial, fungal)Lab fermentationPilot and tox materialSystemUp-scalingProcessProductionFermentationPurificationFormulationFull-scale application testBiosolution based on Novozymes’ technology10

Technology is Developing Rapidly‣ Leading to more innovation‣ Moving constraint from getting data to “know where to look for data”‣ No silver bullets exist. Mastering all technologies and partnerships key to innovationTechnological highlights• Gene sequencing is taking off giving accessto much broader gene diversity• Protein Engineering + High-throughputscreening capacity lifted to new level• Robotic micro-scale application methods• Mechanistic insight in performancemechanisms on molecular level• Increased testing capacity• Enzymatic toolbox is exploding11

R&D Funnel- Illustrative exampleNew leadDiscoveryDevelopmentLaunch!Technical &commercialopportunity•Estimation of marketvalue•IP analysis•Theoretical solutionsTechnical solution &production strain•Technical proof ofconcept•Enzyme selected•Application developed•Partners involvedProduction method inplace•Production strain madewith targeted yield•Regulatory approval•Make it on time and firsttime right12

R&D Allocation100%Enzyme Business – split between new conceptsand optimized productsEnzyme Business – research into conversion of biomass,i.e. 2G ethanol and the sugar platformBiobusiness – research into BioAg, the Albumin andHA platforms, and also renewable chemicals0%Productivity improvements – research into increasing theoutput of our enzyme production13

Strong Innovation Track Across Industries‣ Goal of launching 6-8 products every year‣ Partnering with existing or new customers on R&D projects is optimal‣ In addition to the launches below: customer exclusive products and optimized products‣ More than 85 new molecules and technologies launched in the past 10 yearsHouseholdCareFood &BeverageBioenergyFeed &Other tech.Biobusiness2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Totallaunches8 6 9 7 8 10 8 9 8 6 6= product launch14

Biomass is the New Hydrocarbon SourceRefining:Fractionaldistillationand carboncracking+high CO 2emissionsFuelChemicalsPetroleum(decomposed organic matter!)Hydrocarbons:1. Methane2. Ethane3. Propane4. Butaene5. etc...Energy…BiomassRefining:Pretreatmentand enzymehydrolysisCarbohydrates(C5 and C6 sugars)Fermentation,chemical catalysis ororganic pathways+less CO 2emissions15

Conversion of Renewables into Chemicals- Technology, Partners, and ProjectsStarch,BiomassGlucose3-HydroxypropionicacidBioacrylicacidEnzymaticprocessEngineeredpathwayChemicaldownstreamprocessProduct / Field Partner/ Licenser 2011 2012 2013 2014 2015Green polypropyleneEnd marketpotentialExisting polypropylene market ~ 77MMT, 114 BUSD, CAGR 4%Malic AcidExisting malic acid market ~ 60kMT, 130 MUSD, CAGR 4%16

Improving Profitability Through Productivity Gains3 ways to gainproductivity improvements3Optimize industrial productionFERMENTATIONFORMULATIONRAWMATERIALSPURIFICATIONENZYMES1MICRO-ORGANISMSImprove production strain2Improve enzymeefficacy17