Ozempic’s Economic Empire
Novo Nordisk’s success has created extraordinary opportunities for Denmark, but it might also be putting the country’s economy at risk.
SEPTEMBER 5, 2023
When the skies are clear, the view from the Krogh family’s large living room outside Kalundborg, is stunning: you can see the deep blue fjord and the forests of the Asnæs peninsula in the foreground and The Great Belt Bridge to the Island of Funen in the distance.
Every day, Kasper and Sarah Krogh’s three children — Augusta, Cornelius, and Benjamin — sit around the dining room table and enjoy their breakfast — Danish morning buns spread with butter and cheese — before they are dropped off at school.
The Krogh family are ideal newcomers for a rural town like Kalundborg, which, like many other towns in eastern Denmark, has lost residents to Copenhagen and to Denmark’s other big cities over the past several years.
But Kalundborg has one major attraction that other Danish towns are likely envious of. And it isn’t the view.
Both Kasper and Sarah work at the Danish pharmaceutical company Novo Nordisk, located in a vast complex to the east of Kalundborg’s town limits. Kasper is a civil engineer and Sarah, a social worker, works in human resources and administration.
For the past 75 years, Novo Nordisk has been one of the world's leading producers of diabetes medicine, especially insulin. More recently, however, it has shifted its focus towards the development of medications that not only treat but also prevent diabetes. This was possible after 1986, when the Danish professor Jens Juul Holst discovered the intestinal hormone GLP-1, which proved to regulate blood sugar while also influencing the feelings of hunger and satiety. His discovery formed the basis for Novo Nordisk's now highly successful weight-loss medications, including Ozempic and Wegovy, which have proven to be effective in treating obesity, positioning Novo Nordisk among the frontrunners in an entirely new and highly lucrative market for pharmaceutical companies.
“You feel it right away, just how big of a presence Novo Nordisk has,” Kasper told me. “We’re constantly running into our coworkers at the grocery store, the kids’ school, and the soccer club. Pretty much everyone has some relationship to Novo, or knows something about where we work.”
The two medications, based on GLP-1 technology, were introduced in the United States in 2018 and 2021 respectively, as treatments for diabetes and obesity. They have both gained significant popularity among diabetes patients and subsequently among individuals with severe obesity. Today, they are among the most talked-about medical products overall. More and more countries are expected to approve the products in the coming months, and demand is already surpassing Novo Nordisk's current supply capacity.
Today, Novo Nordisk is one of the twenty largest companies in the world. Since 2020, its market value has more than doubled, and today it is estimated to be about 2800 billion Danish kroner, or $417 billion. (A valuation greater than that of Coca-Cola, McDonald’s, Nike, and Netflix.) It is far and away the highest taxpayer in Denmark. In 2022, Novo Nordisk paid $1.4 billion in corporate tax and its employees paid a total of $900 million in income tax.
In Kalundborg, Novo Nordisk has become a massive driver of growth, not only for the town but also for the region, which has become increasingly reliant on its jobs, investments, tax payments, and education initiatives.
“You feel it right away, just how big of a presence Novo Nordisk has,” Kasper told me. “We’re constantly running into our coworkers at the grocery store, the kids’ school, and the soccer club. Pretty much everyone has some relationship to Novo, or knows something about where we work.”
The company’s massive success has been good for Kalundborg and good for Denmark. It has created extraordinary opportunities, but it might also be putting its small home country at risk, by making its economic fate dependent upon the fortunes of a single corporate entity. It is becoming difficult to imagine how Denmark could continue to exist at its current level of wealth and prosperity without continued successes from Novo Nordisk.
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I was given a bright orange work coat and a hard hat as Kasper Krogh brought me along to a construction site at the Novo Nordisk Kalundborg location. Most days, he ensures that Novo Nordisk, Kalundborg, has the right number of workers onsite to plan, build, and start up the new facilities. But today, he’s giving me a tour.
Beneath us, enormous production halls are being built. Scheduled to be completed in 2027, the new facilities will enable Novo Nordisk to produce significantly more of their products than they are capable of producing today. “When you’re standing up here, you can feel just how large this is, what we’re building,” Krogh tells me, with a smile.
Currently, Novo Nordisk earns more than $150 million a week, and the company has said that it still cannot keep up with demand for its products. Multiple financial analysts estimate that Novo Nordisk’s total profits for 2023 will land somewhere around $11 billion.
The majority of Novo Nordisk’s business has come from insulin for diabetes patients, but today, the revenue from its GLP-1 agonists, like Ozempic and Wegovy, which are used to treat Type 2 Diabetes and obesity, is already double that from its the insulin products. These medicines mimic a naturally occurring hormone called GLP-1, which slows down digestion and reduces appetite. Both Ozempic and Wegovy have received a great deal of attention globally, especially in the United States, Denmark, Germany, and Norway.
The products are so popular in the US that it has been linked to a celebrity weight loss craze. In the United States, Norway and Denmark demand is so high it has created severe shortages of the drugs.
Billions of dollars’ worth of Danish pension funds are currently invested in Novo Nordisk stocks, and about 40 percent of the company’s shares are owned by Danish entities.
“In recent years, Novo Nordisk’s primary growth driver has been its GLP-1 medicine,” said Michael Novod, a stock analyst at the Danish bank, Nordea. “They mimic a gut hormone that has been shown to regulate blood sugar levels, as well as feelings of hunger and fullness. There is an enormous market for these products,” he says.
Wegovy can help severely obese patients lose 15 to 17 percent of their weight in a single year; GLP-1 agonists can potentially prevent Type 2 Diabetes and heart disease.
In August, the results of a long-awaited study found that GLP-1 medications can also reduce the likelihood of serious cardiovascular events by 20 percent in overweight patients. These findings caused Novo Nordisk's stocks to surge almost instantly by nearly 16 percent.
Bernstein, an American wealth management firm, estimates that the market for obesity medications in 2030 will have an annual value of over $75 billion.
It is uncommon, if not unheard of, for a country as small as Denmark to be home to a company as large as Novo Nordisk. But this has also led to Denmark’s growing dependence on the company: Billions of dollars’ worth of Danish pension funds are currently invested in Novo Nordisk stocks, and about 40 percent of the company’s shares are owned by Danish entities.
According to Danmarks Nationalbank, it is unlikely that the Danish economy would have seen any growth at all in 2023 if it were not for the pharmaceutical industry, where Novo Nordisk is by far the biggest player.
But as Novo Nordisk continues to grow, economists have been warning of the risks that come along with the government’s dependence on its revenues.
“A country that is financially dependent on the well-being of just a few companies is running a huge risk. Its economy is more vulnerable to external changes, and it is all the more important that these companies stay at the cutting edge of their fields,” said Herman Mark Schwartz, a professor of political science at the University of Virginia. “Where would future growth in the Danish economy be coming from if not the pharmaceutical industry?”
Schwartz has studied a number of small countries whose economies have been substantially influenced by one or more large companies. This list includes Taiwan, home to the microchip producer TSMC, South Korea, home to Samsung, and Switzerland, home to the pharmaceutical companies Roche and Novartis.
In his research, Schwartz often uses the case of Finland as a cautionary tale. At its peak, Nokia made up 20 percent of Finnish exports. In 2008, the year after Apple launched its first iPhone, Nokia’s sales fell by half. And Finland’s balance of payments went from positive to negative for a period of time, after which the country suffered a decade of stagnated economic growth. Schwartz calls this scenario the “Nokia risk.”
“People say that the global pharmaceutical industry will undergo massive changes in the coming years, particularly with the rise of artificial intelligence and machine learning, which can be used to develop new pharmaceuticals. It’s not clear whether Novo Nordisk can win that race, even if it’s in a favorable position today,” he says.
When asked about these concerns, Lars Fruergaard Jørgensen, the CEO of Novo Nordisk, was quick to assert that they are well-aware of these challenges.
“In addition to our investments in research and development, one of our biggest bets and areas of investment the past three years has been artificial intelligence,” he said.
He explained that Novo Nordisk’s research units have been specializing in protein fermentation for many years, and that this process could be significantly optimized with artificial intelligence.
Novo Nordisk has never been larger and hardly more controversial than it is right now. Much of the critique has followed the launch of Wegovy. The medication raises the question of whether obesity should be treated with medicine, or even be described as a disease in the first place.
In its home country, Novo Nordisk has faced criticism from observers and doctors for pushing an agenda that seeks to promote the perception of severe obesity as a disease, and Novo Nordisk does not conceal its intention to spotlight the consequences of obesity.
And then there is the issue of Novo Nordisk’s prices. In Denmark, the cost of Wegovy is currently approaching 2500 Danish kroner per month, or $363, and if you stop treatment, you will likely gain the weight back.
“In other countries, people can see that rates of childhood obesity are rising,” Jørgensen said. “If we’ve already developed a few good solutions in Denmark—because we’re a small country with a tradition of discussing and solving problems together—we can actually make Denmark into a kind of showcase.”
The Danish public healthcare system provides subsidies for many forms of medication, but there is currently no subsidy available for Wegovy. However, this might be about to change: Earlier this spring, Prime Minister Mette Frederiksen announced that the government is exploring options to assist severely obese citizens in achieving sustainable weight loss.
"Numerous Danes grapple with obesity. We are well aware from the government's perspective that many Danes already find some of the new types of medication promising for weight loss. We also acknowledge that some of you have tried various approaches that proved ineffective," Frederiksen said. "We also recognize that the new medication comes with a hefty price tag. From the government's standpoint, we aspire to offer assistance to more Danes seeking lasting weight loss solutions.”
As of now, the government has not provided details about what this assistance will look like. Like other pharmaceutical companies, Novo Nordisk has long pursued a business model focused on convincing governments and healthcare systems to provide public support for their products. If it is able to do so, it will mean that the company’s current, gargantuan economic footprint will only continue to grow. There may be many more Kalundborgs to come.
This article was originally published in Politiken in June 2023. It has been edited and translated.
✺ Published in “Issue 8: Drugs” of The DialNEWSLETTER
