Rise and fall of the weight-loss injection company

CopenhagenJust two years ago, the Danish pharmaceutical company Novo Nordisk was the most valuable company in Europe (around €600 billion), and its growth seemed limitless thanks to sales of its drugs Ozempic and Wegovy. Originally intended for diabetes, these drugs turned out to be miracle injections for losing appetite and losing weight, causing the Danish company to multiply its value fivefold in just five years.

But despite its spectacular rise, investors have lost confidence in the company in recent months, causing its stock market to fall by more than 60%. According to experts, the Danish pharmaceutical company was reckless because it failed to anticipate the potential for competitors to emerge for its weight-loss drugs, which in some cases have proven to be more effective and cheaper.

One of the first decisions made by the new CEO, Mike Doustdar, appointed in August to reverse the crisis, has been the layoff of 9,000 workers (the equivalent of 11% of the workforce). Most of the layoffs are in Denmark, where the company previously surpassed the GDP of the entire Nordic country, so economists fear that the pharmaceutical crisis will end up affecting the country's growth.

To justify this drastic job cuts, Doustdar stated: "Our markets are evolving, especially the obesity market, as it has become more competitive and more consumer-oriented. Therefore, our company must also evolve." Thus, the company plans to save €1.1 billion in costs to reinvest in the development and sale of new drugs.

Gone are the days when Ozempic and Wegovy injections revolutionized the pharmaceutical industry, to the point that the New York Times He defined these drugs as a phenomenon comparable only to the impact previously had by Botox implants and Viagra. The turning point came in 2018 when Novo Nordisk entered the United States market, where an estimated 100 million people receive no treatment for obesity. Since then, 60% of the pharmaceutical company's sales have been concentrated in the US. Its success has also been helped by the viral social media videos of celebrities explaining that they had lost weight quickly thanks to injections produced by the Danish pharmaceutical company.

But the problems began when the American pharmaceutical company Eli Lilly gained ground with a very decisive commitment to the diabetes drugs Mounjaro and Zepbound, which some clinical studies have shown to be more effective for weight loss. In addition, Novo Nordisk has also had to face pressure from US President Donald Trump and his policy of tariffs on medicines produced outside his country. Trump also sent a letter over the summer to the CEO of Novo Nordisk and 17 other pharmaceutical companies demanding a price cut for their drugs and giving them 60 days to comply. The announcement sparked a dark day for pharmaceutical companies on the stock market, further sinking Novo Nordisk's value and prospects. However, Trump has exempted Eli Lilly from the tariffs, as the firm is building new factories in the US.

As if that weren't enough, Novo Nordisk has also had to compete with the rise of cheaper copies. In 2022, the company experienced a shortage of semaglutide, the active ingredient behind Ozempic and Wegovy, because its production line couldn't keep up with the demand. This encouraged competitors to copy and produce versions of its patented drugs, until the shortage was finally lifted this year. However, the company is currently in a legal battle with more than 130 lawsuits filed in 40 US states to try to eliminate counterfeit products from the market.

Poor prospects

As if the current problems weren't enough, the future outlook isn't much brighter, especially when the semaglutide in Novo Nordisk injections becomes generic starting in 2032, opening the door to even more competitors, while in other markets, such as China. Thus, the Ozempic dose, currently sold in the US at a price of $1,000 a month, in a few years "could be produced in India for just over $4 a month," noted University of Liverpool pharmacology researcher Andrew Hill in an interview with AFP.

In Denmark, economists are warning of fears that the collapse of Novo Nordisk could drag down the rest of the Danish economy. Since the COVID crisis, the Nordic country has experienced an economic "miracle": it grew by 3.5% last year, a figure higher than that of neighboring countries (Sweden, Germany, and the Netherlands). However, the government admitted that without the pharmaceutical sector, the economy would have experienced negative growth in recent years.