Obesity drug company’s expansion raises concerns about Denmark’s dominance

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A surge in sales of celebrity-endorsed medicines has raised concerns that Denmark’s economy risks suffering a fate similar to Finland’s in Scandinavia. Finland’s overreliance on Nokia led to a lost decade that changed the fortunes of the mobile phone maker.

Ozempic, a diabetes drug taken by celebrities to lose weight, and Wigovy, an anti-obesity drug, have made Novo Nordisk the most valuable company in Europe and single-handedly halted Denmark’s recession.

Novo Nordisk’s market capitalization now stands at $410 billion, more than Denmark’s annual GDP of $400 billion last year, raising concerns in authorities that the country’s fate is tied too closely to a single company. It is increasing among people in the industry and economic circles.

“In our view, Denmark has a two-speed economy: pharmaceuticals and other industries,” said Thomas Herr, chief economist at Denmark’s central bank. “The risk is to think the economy is doing better than it actually is.”

“Novo has been very successful, which is great for Novo and its shareholders. But when it comes to Denmark, we worry about what will happen if it doesn’t work out,” said one senior company executive. Told. “Finland ended in a lost decade with Nokia in trouble.”

A line chart showing Novo Nordisk's market value now exceeds Denmark's GDP, but it still doesn't match Nokia's dominance of Finland at its peak.

After finding success during the first wave of mass adoption of mobile phones, mobile phone maker Nokia’s profits collapsed in the 2000s and after Apple launched the iPhone.

At its peak, the company provided a quarter of Finland’s corporate tax revenue and accounted for 4% of GDP. This sharp decline prevented the Nordic economy from growing at all in his 2010s.

Novo Nordisk has been one of Denmark’s largest companies for more than a decade thanks to its focus on diabetes medicines. But in recent years, the company’s valuation, profits and sales have soared, first on the back of the success of Ozempic and then on Wegobee, which directly targets obesity.

The Danish economy expanded by 1.7% in the first half of this year compared to the same period in 2022. However, if the pharmaceutical sector, which is dominated by Novo Nordisk, is excluded, GDP would have declined by 0.3%.

GDP statistics for the third quarter are expected to be released on Friday.

Employees work on the production line at the Novo Nordisk factory in Hillerod, Denmark.
Novo Nordisk factory.The company’s market capitalization currently exceeds Denmark’s annual GDP in 2022. ©Sergei Gapon/AFP/Getty Images

The country’s statistics office compiles data with and without the pharmaceutical sector, as the impact on GDP is widely known. But some believe Denmark’s economy will be resilient, even if Nordisk’s best-selling drug loses popularity.

The main reason for this is that much of Novo Nordisk’s GDP impact is the result of the drugmaker’s production overseas rather than domestically.

Jonas Dan-Petersen, chief national accounts adviser at the statistics agency, said: “The large amount of revenue will be reflected in GDP, but it won’t have such an explosive impact on employment.”

Denmark’s Deputy Prime Minister and Economy Minister Jakob Elleman-Jensen also noted the “significant differences” between Denmark’s current predicament and those faced by Nokia and Finland.

Helge Pedersen, chief economist at Nordea, Scandinavia’s largest bank, said the success of Novo Nordisk and other Danish pharmaceutical groups was a “huge benefit” and that it did not create “overdependence.”

Olli Rehn, who is on leave from his post as head of Finland’s central bank to run for president, said it was a “proper question”.

However, Denmark’s “industrial structure is becoming more diverse; [small and midsized enterprise] Dominance”.

Finnish billboard advertising Nokia's Lumia smartphone
Finnish mobile phone maker Nokia’s profits collapse after Apple’s iPhone launch ©Francis Dean/Corbis/Getty Images

But Novo Nordisk’s roots in Denmark are strong. Approximately 40% of its employees are based there. Last year, Denmark added 3,500 jobs, bringing the total to 21,000.

The company invested more than DKr 10 billion ($1.4 billion) in domestic production last year and paid more than DKr 15 billion in taxes, about 1% of the total collected by the country in 2020.

Pedersen said a big risk is that policymakers could overlook the situation at companies outside the pharmaceutical industry.

“There are some companies that are struggling. We must not forget about these companies when we think about fiscal policy and labor market policy. The majority of Danish companies are not very competitive,” he says. I did.

Alex Stubbe, a former Finnish prime minister and another presidential candidate, said there was relatively little Copenhagen could do about this risk.

“All you can do is keep your distance. The government realized that when Nokia phones started breaking,” he said. “But there’s really not much you can do. The tax revenue is welcome. But if you start interfering with company operations, you’re not doing your job.”

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