December 2023
Novo Nordisk - Improving the lives of patients

In the 1920s, diabetes was a fatal disease. Patients suffering from diabetes had a life expectancy of only three years after diagnosis. In 1922, the Danish couple August and Marie Krogh returned from Canada with patent rights to produce insulin in Scandinavia. One year later, August Krogh and Hans Christian Hagedorn founded the ‘Nordisk Insulinlaboratorium’. In 1925, the Danish company Novo Terapeutisk Laboratorium was founded, which also focussed on insulin production. By 1925, thanks to the entrepreneurial initiative of Mr Krogh and Mr Hagedorn, the life expectancy of diabetes patients after diagnosis had increased from three to 30 years. Both companies developed into leading international insulin manufacturers. In 1989 both firms merged into Novo Nordisk.

Over the past 100 years, the Danish company has developed into the global market leader in diabetes. More recently, Novo Nordisk also succeeded in helping overweight people to lose weight with their drug Wegovy. In addition, Wegovy seems to reduce the likelihood of heart attacks and strokes by 20%. Today, Novo Nordisk’s research commitment does focus on 4 core areas: Diabetes, obesity, rare diseases and chronic diseases.

Novo Nordisk has the ambition to create value for society, shareholders and the company. Over the past decades , management built a credible and strong track record in this respect. Key financial figures for the 2022 financial year such as return on capital employed (73.6%), net debt (4.8%) and operating margin (42.3%) underline the commercial success of Novo Nordisk's strategy. In the 2022 financial year, diabetes related revenues grew by 14% and obesity related sales increased by 84%. The goal of improving the lives of patients with chronic diseases through innovation is underpinned by a strong focus on research and development (R&D): R&D expenditure as a percentage of net sales increased from 12.2% (2020) to 13.6% (2022).

The Novo Nordisk Group's business risks are not insignificant: They include, for example, so-called ‘clinical pipeline risks’ (products do not reach the market or are only launched with a delay), risks relating to supply chains, product quality and product safety as well as market changes or crises in healthcare systems, which can have serious consequences for the commercial success of Novo Nordisk's products. There are also IT security risks, legal and patent risks and financial risks. Management monitors these risks using a ‘risk grid’ in which, among other things, a comprehensive risk analysis is carried out every six months. The aim is to identify the operational risks that could have the greatest impact on business activities over the next three years.

We like management's determination to improve the lives of chronically ill patients through enormous research efforts, while also creating benefits for society, shareholders and employees. We find the corporate culture attractive and credible: Novo Nordisk's excellent reputation attracts talented researchers and scientists. However, it is also true that past achievements are no guarantee for future success. Nonetheless, we are confident that Novo Nordisk's management will succeed in keeping the company on course even in difficult times.

Author: Jochen Kurz

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