A company that is bigger than the country it is in!
How a pharmaceutical major is changing the fortunes of a nation solving man-made problems.
Denmark is a small Scandinavian country, with a population of less than 6 million people. The country is known for its wind energy business and agriculture. Of late, it seems like the entire country’s fortune is linked to the pharmaceutical business.
Back in the early 1910s pioneering work was being done to understand diabetes, its causes and its cure. A lot of research was undertaken on both sides of the Atlantic but Insulin was discovered in Canada. The production started in Denmark and Austria. A reflection of what the power equations were like on either side of the Atlantic back in the day.
Nordisk Insulinlaboratorium was set up in 1923 to produce Insulin. It was one of the first businesses set up to produce Insulin to fight diabetes. In 1986, the company was acquired by Novo Industri and the resulting company was called Novo Nordisk Pharmatech A/S.
Companies like Kellogg’s were just getting started in 1910 and it took them more than half a century to vilify fat and to turn diabetes into a full-blown epidemic.
Insulin has been central to the fortune of this company for the past 50 years. They have been one of the largest producers of Insulin. Between Eli Lily, Novo Nordisk and Sanofi, almost 90% of global insulin is produced.
Being such a large manufacturer of Insulin means that the company keeps experimenting with newer formulations. Through experimentation, they arrived at a compound called Semaglutide. This was meant to be a medication for Type-2 Diabetes patients. But this drug is changing the company’s fortune.
So what is Semaglutide?
You will lose weight with Semaglutide because you will eat less, and feel fuller when you do eat. Semaglutide does this by by targeting an area in the brain (called GLP-1 receptors) that help to regulate your appetite and how much you eat. It closely mimics a natural hormone in the body called incretin, which is made primarily in our digestive tract.
Semaglutide is used as a long-term weight loss treatment in addition to a healthy diet and exercise to help promote weight loss.
So here is a drug that tells your brain that you are full and thus you stop eating. And since you stop eating, you lose weight. The product is marketed under the name of Wegovy and Ozempic and the popularity of the drugs has resulted in incredible demand for the drug and stockouts.
Thanks to booming demand for its weight loss treatment Wegovy, the Danish business last week became Europe’s biggest company by stock market value, overtaking the previous holder of that title, French luxury group LVMH. Novo Nordisk’s stock market value of £340bn now exceeds Denmark’s entire economic output, estimated at £323bn this year.
The surge in overseas sales of the drug has pushed up the value of the Danish krone, forcing the country’s central bank to keep interest rates lower than it otherwise would in order to rein in the value of the currency. The krone is pegged to the euro in order to facilitate trade with the euro area.
The success of Wegovy has created this weird situation where the market cap of the company is greater than the GDP of the country it belongs to!
Thanks to the drugmaker, Denmark has, on paper, at least, avoided the economic slump experienced by its neighbours Germany and Sweden. It would be technically in recession now(defined as two consecutive quarters of contraction), as the rest of the country’s industry is in decline, economists say. Without the contribution of the pharmaceutical sector, Danish industry would have slumped by 15% over the past year.
It is quite a turnaround for a company that has battled falling insulin prices, and six years ago was contemplating a string of acquisitions to breathe new life into its drugs portfolio. At the time, it also paid $59m in the US to settle claims that its sales staff gave doctors misleading information, although it continued to deny wrongdoing.
Like all good businesses, it seems like this drug will be a lifelong affair for those who choose to get on it.
If you stop using Ozempic injection for type 2 diabetes, your blood sugar levels will rise and you may lose any positive benefit for heart health. Much of the weight you have lost will most likely return within a few months to one year after you stop treatment.
So in startup speak, this is a high-retention product where the business can absorb the high cost of customer acquisition because the lifetime value of the customer would be quite high.
So the Pharma industry has answered the calamity that was created by the food industry. Morgan Stanley is worried…
Morgan Stanley Research analysts estimate that 24 million people, or 7% of the U.S. population, will be taking these drugs by 2035. This may be welcome news for the biopharma industry, but the drugs’ prevalence could have long-term implications for food-related sectors as consumers eat less and make more nutritious choices.
"The food, beverage and restaurant industries could see softer demand, particularly for unhealthier foods and high-fat, sweet and salty options,” says Morgan Stanley’s tobacco and packaged food analyst Pamela Kaufman.
That’s because the new class of obesity medicines works by decreasing appetite and in turn can reduce calorie intake by 20% to 30% daily, according to findings from a Morgan Stanley research survey of 300 patients taking the drugs. Significantly, survey participants cut back the most on foods high in sugar and fat, reducing their consumption of confections, sugary drinks and baked goods by as much as two-thirds. As more people in the U.S. use obesity drugs, overall consumption of carbonated soft drinks, baked goods and salty snacks may fall up to 3% by 2035.
Source: Morgan Stanley
Insulin manufacturers killing the food industry. But calling it the food industry is a joke. Most of what we are served is edible molecules, not food. Read More.
The insulin mechanism is important for the healthy functioning of the body. What Ozempic seems to do is break that insulin mechanism by targeting the brain. The drug has its regular list of side effects which include dizziness, fatigue, hairloss, etc. But keeping in mind that the drug itself was invented only in 2012 and was approved by the FDA in June 2021, the long-term effects of the drug are not known.
Potential long-term side effects listed for Wegovy and Ozempic, as well as rival pharmaceutical company Eli Lilly’s diabetes drug Mounjaro, include pancreatitis, risk of thyroid cancer and problems with the kidneys.
So the fortunes of the Danish Economy, the Pharma industry and the food industry are at a crossroads thanks to this one drug!
The tail seems to be wagging the dog in Denmark. If the fortunes of Novo Nordisk take a turn for the worse, all of Denmark will pay for it.