06/15/2024 – 9:00
The owner of weight loss drugs that have been successful around the world has reached a market value of more than US$570 billion. As a result, Danish pharmaceutical company Novo Nordisk is larger than the country’s entire economy, which recorded a GDP (Gross Domestic Product) of US$410 billion last year.
Ozempic, a semaglutide injection launched in 2017 to treat type 2 diabetes, quickly became famous. The drug’s side effect caught the attention of the media, celebrities, influencers, politicians and businesspeople, which increased the popularity of the “weight loss pen”.
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Searches for the drug in Brazil grew 307.6% this year, according to a study by Semrush, reaching 1.5 million monthly searches on the internet.
In 2021, Novo Nordisk launched a second semaglutide-based product, WeGovy, for the treatment of obesity. With the boom in medicines, the century-old company rode a positive wave throughout 2023:
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It became the most valuable company in Europe, surpassing the luxury brand LVMH (Moët Hennessy Louis Vuitton). At the end of this report, Novo’s market value was US$623 billion compared to LMVH’s US$408 billion.
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Its performance helped Denmark avoid recession, as the pharmaceutical sector was one of the main responsible for the 1.7% growth in the country’s GDP (Gross Domestic Product) – more than four times the growth of the Euro Zone, which closed by 0.4%;
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It was responsible for the largest industrial investment in the country’s history made by a company, worth US$8.6 billion, to expand its factories in the small city of Kalundborg, with 17 thousand inhabitants;
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It was Denmark’s biggest tax payer and biggest employer in recent years.
Novo Nordisk’s growth impacts several sectors in the country. In addition to direct investment in factories, the company also invested in expanding a highway to handle the flow of new units and move the secondary market.
While universities have increased places on biotechnology courses with an eye on the future demand for these professionals, the foundation run by the company offers scholarships and sponsors doctoral courses and research in development areas such as data sciences, biotechnology and bioengineering.
The Ozempic effect also indirectly impacts the job market, as it generates jobs in industry, manufacturing and supply of materials and laboratories, explains economist Philipp JH Schröder, professor and researcher at Aarhus University, in Copenhagen.
And a lot of people are keeping an eye on these positions. Novo Nordisk was elected the best company to work for in the world, according to the Best Places to Work 2023 ranking. And a survey released in May by Universum revealed that the company is also the most desired among students in the country, beating Lego, Danish company reference that occupied the first position in previous years.
But popularity also brought challenges: high demand for Ozempic led to a shortage of the product. Given this, the company had to ration drug sales and invest heavily in its expansion project, but predicts that limited supply may still persist.
The expansion of the scope of treatment has completely impacted the way the business is run and interacts with customers, said the company’s CEO, Lars Fruergaard Jorgensen, to the American newspaper The New York Times. And fully understanding obesity and its related diseases is still a challenge for Novo Nordisk.
The high value of the product and the price difference between countries makes the company a target for criticism. In Brazil, for example, the 0.25/0.5mg unit is sold for around R$1,000. In Denmark, the value is 873.35 Danish crowns (equivalent to R$670).
In the United States, the product’s largest consumer market, the price listed is much higher, around a thousand dollars per pen, but there are significant discounts depending on the type of health plan and patients’ income.
Bubble?
The phenomenon raises two alerts. First, that the Ozempic effect, with its sudden popularity, is a bubble about to burst. Second, the company’s importance to the Danish economy can make the country hyper-dependent on it – and susceptible to possible fluctuations and shocks.
For Schröder, the so-called “Ozempic effect” is not a bubble for three reasons: the pharmaceutical industry in the country is consolidated and Novo produces half of the insulin available for the treatment of diabetes in the world, the launch of WeGovy and investment in research and innovation shows that the company is willing to diversify its offer, and the nature of the products’ very long-term treatments guarantees constant demand.
“Patent protection ensures that you can maintain your competitive advantage for several years before competitors innovate and begin to compete with you. Therefore, it is not a volatile market. Of course, eventually new products may appear and cause problems, but it doesn’t happen overnight”, analyzes the professor.
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