Can Denmark’s world-leading pharmaceutical manufacturer stay ahead of the curve?

Late last year, Danish pharmaceutical company Novo Nordisk became Europe’s most valuable company, at least for a short period of time.

Well-known in the business world but not a household name, Novo Nordisk has traditionally not been seen as a major player in the pharmaceutical industry, much less a giant in the European stock market. Ta.

But having discovered the holy grail of all drugs, it has rocketed to the top of the league table, valued at $428bn (£342bn). It’s something that millions of people want and need, not just in the Western world, but around the world.

Its active ingredient, called Wegovy, was designed to tackle type 2 diabetes, but it turned out that it almost certainly caused weight loss as a side effect.

Like Viagra, which was originally intended to treat high blood pressure, its unrealized but popular side effects have made Wegoby a must-have drug.

It’s knocking on the open door – Goldman Sachs research predicts the anti-obesity drug market will be worth about $6 billion this year. However, it could grow more than 16 times to $100 billion by 2030.

It sounds too good to be true, but what are the long-term prospects and consequences for drug companies that have found a surefire winner? Is it really the Midas touch or a poisoned holy grail? ?

First of all, discovering a drug that suddenly dominates the market is only the beginning of the process. They have to make it, sell it, and negotiate prices with numerous medical companies and the National Health Service.

Some healthcare organizations, such as the UK’s NHS, are large enough to be able to force costs down, which can reduce profitability for even the most popular medicines.

Claire Machin is Executive Director for International Policy and UK Competitiveness at ABPI, the UK’s leading body for pharmaceutical companies.

She told me that the UK would not only use the value-for-money standard set 20 years ago to force drug price reductions, but that the NHS would negotiate even lower prices and then if the NHS exceeded the price said it would seek more cash rebates from businesses. Budget for that medicine.

“The UK therefore spends relatively little on medicines compared to similar countries, spending around 9% of its total health budget on medicines, compared to around 14% in Australia, around 15% in France and around 15% in Germany. It’s about 17%.”

There were also operational issues, and Novo Nordisk struggled to meet the huge demand for Wegovy in 2022. The company’s stock price fell in December 2023 due to concerns about whether it could again produce the drug in sufficient quantities and at a high enough quality to satisfy industry regulators.

The company confirmed that it ran out of 1.7mg doses of Wegovy during December in the United States. This incident occurred despite the fact that the production line was running “24 hours a day, 365 days a year.”

However, it is expected that shipments will resume sometime this month.

Then there’s the very obvious fact that Wegovy’s head start was just that: a head start.

Other companies have already released drugs with similar effects. These companies will work day and night to improve their drugs, sell them more effectively, sell them cheaper, and out-maneuver Novo Nordisk at every opportunity. After all, a potential market of $100 billion a year is at stake.

In November, American pharmaceutical giant Eli Lilly received approval for its weight loss drug Munjaro in the UK. Other alternative drugs include drugs such as Saxenda, Orlistat, and Ksimia, and the battle to dominate the weight loss drug market is well underway.

Of course, Novo Nordisk is protected from direct competition by pharmaceutical patents, which typically last 20 years. Anyone can then enter the market and manufacture their own generic version of that drug.