Novo Nordisk: the pharma giant making Denmark rich from US obesity epidemic

Soaring demand for two weight-loss wonder-drugs developed by a Danish pharmaceutical company is having a knock-on effect on the whole of Denmark’s economy.

Novo Nordisk, which produces Ozempic and Wegovy, has seen its share price triple in three years, with the company now valued at more than the entire Danish economy.

What is behind its meteoric rise?

The company has effectively “cornered the US market” thanks to being the only US Food and Drug Administration (FDA)-approved manufacturer of a “blockbuster” pharmaceutical called semaglutide – the active chemical behind Ozempic, a Type 2 diabetes drug, and Wegovy, an obesity treatment – said Fortune.

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Semaglutides work by prompting the body to produce more insulin, which helps diabetes patients reduce the amount of sugar in their blood, “but in higher doses it also interacts with parts of the brain that regulate appetite by creating the feeling of being full,” claimed the financial magazine.

A once-weekly shot of Wegovy has been found, on average, to reduce an adult’s body weight by around 15% over the course of a year.

The FDA approved Ozempic in 2017 and Wegovy in 2021, and they have proved so popular that Novo Nordisk has had to limit supplies in the US as it ramps up production. In some ways, said Fortune, the scarcity helps “further feed into the drugs’ popularity with more buzz surrounding the obesity drug”.

The drugs have also enjoyed the backing of high-profile figures, most notably Tesla founder and Twitter/X owner Elon Musk, who credited the wonder drug with helping him shed pounds after he was fat-shamed by his own estranged father last year.

Will the boom times last?

This month, the company reported the results of a clinical trial that showed Wegovy also cut the risk of heart attack or stroke by 20% in those with obesity or who are overweight, compared with a placebo.

This “unexpected development” has not only propelled Novo Nordisk shares to record highs, said the Economic Times, but has also “ignited hopes of redefining Wegovy’s perception from being perceived solely as a lifestyle drug”.

Novo Nordisk hopes the trial – the largest ever conducted by the company – “will persuade more health systems and insurers to pay for the drug”, said the Financial Times. The paper said these have so far been “reluctant to cover the drug because of the potential cost of providing it to the huge number of people with obesity”, including about 40% of US adults.

With the World Obesity Federation predicting that, by 2035, one in four people will be obese if current trends continue, “the boom times are unlikely to end soon” for Novo Nordisk, CNN Business reports.

Its profits are now expected to grow by up to 37% this year, much higher growth than the maximum 19% rise it forecast in February.

What is its impact on the Danish economy?

“After 100 years of relatively quiet existence as a maker of diabetes drugs,” the Danish pharmaceutical firm has “suddenly grown so big that the company is reshaping the Danish economy”, said The New York Times.

In the past few weeks, Novo Nordisk’s soaring share price has made it the second most valuable public company in Europe, after the luxury goods group LVMH, with its £400 billion market value now exceeding the size of the entire Danish economy.

Booming sales of Ozempic and Wegovy have led to an influx of US dollars into Denmark’s economy, which has pushed up the value of the Danish krone, Jens Naervig Pedersen, a director at Danske Bank, said last week.

The company’s success now accounts for almost all of Denmark’s recent economic growth, and the surge in overseas sales in the drugs is prompting the Danish central bank to keep interest rates lower than it otherwise would, economists say. As a result, many homeowners in Denmark are paying lower rates on their mortgages than their peers elsewhere in Europe.

Andrew Kenningham, chief Europe economist at Capital Economics, told CNN that Denmark had “done better than almost any other European economy” since the pandemic, down “very largely” to the success of its pharmaceuticals industry.

The company’s shadow is “so expansive” said The New York Times, “that Danish economists are now debating whether the country needs to publish another set of economic statistics that strips out Novo Nordisk”.

“In other words, there’s Novo Nordisk, and there’s the rest of the economy,” said the paper.