Fat Gains in Obesity | Finansavisen
In Bagsværd, a little north of Copenhagen, we find the head office of Novo Nordisk. It is a giant pharmaceutical company that dominates the insulin market with a global market share of almost 47 percent. Insulin is primarily used to treat diabetes. The global diabetes market has an estimated value of around NOK 490 billion. With a global market share of 32 percent in the diabetes market, Novo Nordisk has outgrown its competitors. The second largest player in the market, Eli Lilly, has around 20 percent market share.
More worth than Equinor
Some mounds illustrate the company’s size. Novo’s revenue in the first nine months of the year was around NOK 180 billion, and the bottom line was around NOK 59 billion. The stock market value is an incredible DKK 2,971 billion. It is worth far more than Equinor, which has a stock market value of DKK 1.158 billion. The Danes’ old flagship, Maersk, is worth 379 billion.
Novo has been a money and dividend machine
At the start of 2020, a Novo share costs DKK 391. In January this year, the share costs DKK 663. At the time of writing, it costs 925 Danish kroner, mind you in a very sour year on the stock market. In three years, the stock has risen 141 percent. But the shareholders’ joy does not stop there. Novo has been a money and dividend machine. In the first nine months of the year, the company had free cash flows of 62.5 billion Danish kroner, and a total of 42 billion was sent to the shareholders.
A global epidemic
So what does this have to do with obesity? Quite a few, actually. Novo Nordisk lives on patents, and these expire. Therefore, research and development are absolutely essential for long-term growth. The company is good at launching new patented medicines. Novo Nordisk has shown that blood sugar-regulating preparations contribute to weight loss, and it has been many years since the company started investing in preparations to help overweight people. It has a clear strategic rationale.
Obesity is a global epidemic affecting around 765 million people. Obesity occurs when the body mass index (BMI) reaches 30 or higher. Authorities all over the world are putting a sharp spotlight on the development. Research reports show that obesity can have around 200 sequelae, and financial analyzes from, among others, McKinsey estimate that around 8 percent of health budgets go to obesity-related treatments. Obesity is considered a leading cause of premature death. However, estimates from Novo Nordisk point to only 10 percent of affected people seeking help, and only 2 percent receiving treatment. By making treatment available to a greater proportion of these very obese individuals, the market can really accelerate.
Obesity is considered a leading cause of premature death
The market is taking off
There is already a lot of activity in this area at Novo Nordisk. The preparation Wegovy, which is based on the molecule semaglutide, sold for a modest 800 million Danish kroner in 2021. It is expected to have a turnover of 5.4 billion Danish kroner in 2022, a growth of 575 percent! Semaglutide is a so-called GLP-1 molecule which, among other things, acts as an appetite suppressant. Novo Nordisk also uses this in the diabetes drugs Ozempic and Rybelsus. Norwegian media have recently written about how sales of Ozempic have exploded in Norway, as many have discovered that the preparation has a slimming effect.
Novo Nordisk has a strong presence in this market, which is experiencing explosive growth. Some analysts estimate that the sales of Wegovy will reach around 45 billion Danish kroner in 2025, several times higher than today’s level, and will therefore contribute to Novo Nordisk being able to increase the revenue growth figures. Delivery problems and securities have resulted in the company not being able to satisfy the demand for the product in 2022, but it is produced around the clock, and goods in the USA, where there are over 100 million very obese people. In addition to Wegovy, Novo Nordisk has also prepared Saxenda, which is also a GLP-1 preparation, but this must be taken daily, while Wegovy only requires one weekly dose.
Spooky centenarian
American Eli Lilly is undeniably somewhat in the shadow of the large Danish competitor, but in 2023 the company aims to challenge Novo Nordisk to a greater degree. The injection preparation Mounjaro, which is a glucose inhibitor, was approved in 2022 and will initially challenge the Ozempic preparation for Novo Nordisk. Ely Lilly is betting that Mounjaro will also be approved as a preparation for weight loss in 2023, so that they can seriously challenge Novo Nordisk.
The shareholders are licking their lips
If the figures from Novo Nordisk are to be believed, the company dominates a brand that is growing strongly. From August 2021 to August 2022, Novo Nordisk had a growth in the obesity segment of 148 percent. The market share increased in the same period from 70 percent to 86 percent. With a significantly improved delivery situation, sales can explode. In the USA, the company has agreements with insurance companies and health insurance schemes which could mean that 30 million Americans can receive subsidies for treatment with Wegovy. So far, 125,000 have come under treatment, writes Dagbladet Børsen.
This year marks 100 years since Novo Nordisk was established. In 1921, researchers in Canada succeeded in extracting insulin from the pancreas of a dog, and the following year the first child with diabetes was treated with insulin. August and Marie Krogh brought the technique to Denmark and founded the Nordisk Insulinlaboratorium in 1923. Today, 100 years later, the situation for Novo Nordisk is better than ever, with a dominant position in a market that has never been bigger and which continues to grow. Well, the fight against obesity is starting, and the shareholders are licking their lips.