Novo Nordisk, the Danish pharmaceutical company behind Ozempic and Wegovy, disrupted themselves with the drug equivalent of an iPhone moment. The podcast dives into their 100+ year history, Nobel Prizes, board room dramas, and the world's largest charitable foundation. It explores the discovery and production of insulin, Novo Nordisk's journey in the insulin market, and the challenges faced in the pharmaceutical industry. The podcast also discusses the impact of genetic engineering on insulin production, the race for human insulin, and the complexities of the pharmaceutical supply chain. It touches on Novo Nordisk's success and stagnant stock, the incentive problem in healthcare, and the power of incumbents in the industry. The podcast delves into the FDA approval process, value creation vs value capture in Novo Nordisk, and the acquisition of Pillpack by Amazon.
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Quick takeaways
Novo Nordisk disrupted itself with the drug equivalent of an iPhone moment.
Novo Nordisk's 100+ year history is filled with Nobel Prizes, bitter rivalries, and boardroom dramas.
The company has the world's largest charitable foundation, Novo Nordisk Foundation.
Novo Nordisk emerged as Europe's dominant insulin producer after supplying insulin during Nazi occupation.
Novo Nordisk's development of GLP-1 analogs has been instrumental in treating type 2 diabetes and aiding weight loss.
The company's focus on metabolic disorders and commitment to providing affordable drugs sets them apart in the pharmaceutical industry.
Deep dives
The Emergence of Novo Nordisk as a Dominant Insulin Producer
During the early 20th century, August Crow, an animal biologist and founder of Novo Nordisk, nominated Frederick Banting and John McCloud for the Nobel Prize in Physiology or Medicine for their discovery of insulin. This event led to the founding of Nordisk Insulin, later known as Novo Nordisk, focused on producing and distributing insulin in Scandinavia. Novo emerged as a strong rival, developing shelf-stable liquid insulin and competing head-to-head with Nordisk. During World War II, Nordisk's licensing revenue was cut off due to Germany's occupation of Denmark, while Novo became the insulin provider for Nazi-occupied Europe. After the war, while Novo scaled production, Nordisk fell behind due to its loss of foreign licensing revenue. Novo's scientific research capabilities expanded, leading to the introduction of advancements such as Lente insulin. Both companies engaged in a bitter competition until they ultimately merged in 1989.
Challenges and Diversification at Novo Nordisk
Novo faced challenges in the post-war era, acquiring the bulk of insulin demand as the largest producer in Europe. They diversified into the enzymes business, but soon faced financial issues as the enzyme market crashed. Despite this, Novo continued to invest in insulin research and development, leading to advancements such as MC insulin, a pure insulin formulation. The company's diversification ultimately resulted in spinning off the enzyme business as Novo's IMS in 2000. Alongside their insulin production, Novo's IMS remains majority controlled by Novo Holdings, affiliated with the Novo, Nordisk Foundation.
The Impact of the Foundation Structure
The foundation structure of Novo Nordisk has been integral to its development and survival. Led by the Novo, Nordisk Foundation, the company's profits were used to fund further diabetes research and support patients in Scandinavia. The company's mission focused on providing affordable insulin in the region while exporting at market prices to fund research efforts. The ethics surrounding Novo's involvement in providing insulin during Nazi occupation are complex, but they ultimately played a crucial role in supplying insulin across Europe. This era marked a turning point for Novo Nordisk, transforming it into Europe's dominant insulin producer, leading to advancements in insulin formulations and delivery systems.
The Novo Nordisk merger and the rise of insulin market
In the early 1970s, Novo Nordisk merged to become a leading player in the insulin market. Nordisk, a long-time rival, joined forces with Novo as they realized the potential of the new MC insulin generation. Nordisk's CEO, Henry Brenham, convinced the board to invest in expanding the company's production capacity and enter the American market. This strategic move paid off as Nordisk's sales grew by 30% annually throughout the 1970s, making them a significant player in the insulin industry.
The discovery of GLP-1 analogs and Novo Nordisk's breakthrough
During the 1990s, Novo Nordisk researcher Lata Biera Knudsen worked on developing GLP-1 analogs, which regulate insulin production. Meanwhile, independent researchers discovered GLP-1 analogs in the venom of the Gila monster lizard. Lata's team at Novo Nordisk developed liraglutide, a GLP-1 analog with an extended half-life, making it effective with once-daily injections. The drug entered phase 3 clinical trials in 2005, showing promise for treating type 2 diabetes and potentially aiding weight loss.
Challenges in gaining FDA approval for weight management drug
Novo Nordisk faced challenges in gaining FDA approval for liraglutide as a weight management drug. There was a stigma surrounding weight loss drugs due to past failures and safety concerns. However, clinical trials showed liraglutide's efficacy in weight loss and reduced appetite. The drug's previous FDA approval for treating type 2 diabetes also gave Novo Nordisk confidence in its safety. Despite initial pushback from the company's official position, Novo Nordisk moved forward with liraglutide as a weight management drug, recognizing the potential market opportunity.
Focused on Metabolic Disorders
Novo Nordisk's main focus is on metabolic disorders, particularly diabetes and obesity. They have a clear mission to eradicate diabetes and have a long history of research and development in this field.
Cornered Resource
Novo Nordisk's patents on their drugs, particularly semaglutide, provide a cornered resource and a competitive advantage. Their ability to protect their intellectual property allows them to maintain high profits and market dominance.
Concentration
Novo Nordisk's concentration in the metabolic disorder market has allowed them to become a market leader and achieve significant growth. Their laser focus on this specific area has positioned them well for success.
Employee Alignment with Mission
Novo Nordisk's compensation structure, which does not heavily incentivize stock performance, promotes employee alignment with the company's mission rather than short-term financial gains. This fosters a strong commitment to their goals and values.
Shift in Pharma Focus
Pharma companies have shifted away from developing mass population drugs to focusing on specialty drugs for specific diseases with smaller populations and higher price tags. Novo Nordisk stands out for its commitment to providing relatively inexpensive drugs to broader populations.
Challenges in Healthcare Innovation
The healthcare industry faces challenges in developing breakthrough mass market drugs like statins and struggles to discover new treatments for diseases. The shift towards treating chronic illnesses and the increasing complexity of biologics have led to rising costs and a decline in return on investment for drug manufacturers.
Last year Novo Nordisk, the Danish pharmaceutical company behind Ozempic and Wegovy, overtook LVMH to become Europe’s most valuable company. And the pull for Acquired to finally tackle healthcare (18% of US GDP!) became too strong for us to resist. While we didn’t know much about Novo Nordisk before diving in, our first thought was, “wow, seems like these new diabetes and obesity drugs mean serious trouble for big insulin companies.”
And then… we realized that Novo Nordisk IS the big insulin company. And in a story befitting of Steve Jobs and Apple, they’d just disrupted themselves with the drug equivalent of an iPhone moment. Once we dug further, we quickly realized this company has it all: an incredible 100+ year history filled with Nobel Prizes, bitter personal rivalries, board room dramas, a generation-defining silicon valley innovation, lone voices persevering against all odds — and oh yeah, the world’s largest charitable foundation at its helm. Tune in for one incredible story!
Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
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