PIngram, who manages a ranch in rural Texas, isn’t the type of guy you’d normally associate with a weight-loss fad. But a year ago, he finally got tired of dragging his 320-pound body (145 kilograms) around in hot weather all day. There is a history of heart disease in his family. He is painfully aware of the risks of obesity due to covid-19. His efforts to lose weight through diet and exercise were fruitless. “I need some help.”
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So his doctor, a family friend, suggested he use Danish drugmaker Novo Nordisk’s injectable drug, which is approved to treat type 2 diabetes but, as a side benefit, also helps with weight loss . At first, the price of about $1,000 a month was out of Mr. Ingram’s reach. Because he doesn’t have diabetes, his insurance company won’t cover it. Then he found an online Canadian pharmacy that offered to ship him $350 a month. He has lost 60 lbs since using it. When he went to the gym to pick up two 30-pound barbells, he thought, “I used to carry that much weight on my back all day.” He thought it was life-changing—he ate less, worked out more, and he The doctor “died with joy”. “It’s shocking to me that insurance companies don’t want to pay for this.”
The drug he used, Ozempic, is now a meme. But it’s not just “skinny pen” jabs aimed at starlets. In the United States alone, 110 million people like Ingram are obese, many of them on low incomes. They need help getting into shape. Novo Nordisk is their new port of call. It’s been a wild ride. Following the surprise success of Ozempic, the company’s latest potential blockbuster drug, Wegovy, is a multi-year U.S. Food and Drug Administration (FDA)Food and Drug Administration) approved for obesity. That means some insurance companies will cover it. The company, which will turn 100 in 2023, has traded like a growth stock over the past two years, doubling its market cap to $326 billion on hopes for overlapping diabetes and obesity drugs Capable of becoming the largest-selling class of drug of all time.U.S. Eli Lilly is expected to grab most of the market, with Eli Lilly’s diabetes drug Mounjaro likely to win out Food and Drug Administration Obesity approved this year. It’s like the race for a covid-19 vaccine. The combined market capitalization of Novo Nordisk and Eli Lilly easily exceeds that of AstraZeneca, Moderna and Pfizer combined.
In the eyes of some pundits, Novo has lost its lead. It underestimated demand, mishandled supply and thus slowed its ambitions to launch Wegovy in Europe. Its boss Lars Jorgensen admits to making some mistakes. But overall, the Novo deserves credit. Hesitancy to an unprecedented surge in demand is not the most serious drawback. Amid the pandemic, many companies, from e-commerce to automakers to gunmakers, are dealing with demand shocks. Instead of bemoaning Novo’s performance, learn from it. Its efforts to tackle obesity offer some golden rules on how to deal with boom times.
The first thing to remember is to know your onion. Analysts have long complained that Novo’s focus on diabetes-related diseases makes it the least diversified big pharma in Europe. But that’s crazy orthodoxy. One of the strengths of the company’s founders, who first manufactured insulin in Denmark in the 1920s, is specialization. In 1990, management guru Michael Porter called Denmark’s ability to export insulin one of its great competitive advantages. This focus on industry has given Novo Nordisk a head start on obesity. For decades, it toiled in the wilderness while its competitors argued that diet pills were neither effective nor safe.but once found GLP certification-1 It’s a drug for diabetes that, if long acting, can cause at least 15% weight loss, it doubles.In addition to obesity, it hopes to use GLP certification-1 Related medicines help in the treatment of heart disease and other related diseases. Its success demonstrates the merits of innovating in an adjacent, highly specialized business rather than creating it from scratch.
The second lesson is: know your real market. Novo Nordisk initially struggled as demand for the weight-loss drug surged much faster than usual for its other drugs, rapidly depleting stocks. That deprives some patients of much-needed drugs, as influencers are using TikTok and other social media apps to spur demand. It’s a reminder of the dangerous distractions of the hype cycle. So now the company is going back to basics. It focuses on body mass index (BMI) over 30, like Mr. Ingram. It is working with doctors to ensure they are prescribing the drug correctly. It also set about convincing insurance companies and health authorities to pay for obesity treatment.
The third is to control production capacity. As demand surged, one of Novo’s contracted filling points in Europe failed. Mr Jorgensen said the situation was improving. It already has two filling sites in production and plans to double capital expenditure in 2023 for the second year in a row. But it shouldn’t overreact. Smart companies like Amazon have learned during the pandemic that excessive trust in the “new normal” can lead to excess capacity. Many, including the e-commerce giant, have already laid off staff and property. Novo’s factories in the U.S. and Denmark that make the active ingredients for its drugs took five years to get up and running, at a cost of $2.5 billion. That gives it a generous head start. Even if the obesity market is promising, steady progress is better than haste.
Thin Pen, Big Profits
Finally, plan for the long run. Profits are booming, leaving investors ecstatic. But many people who need diet pills can’t afford them.Americans earning less than $15,000 a year earn the most, according to Jefferies survey BMISecond. Novo has every right to be rewarded for its innovation. Insurance companies may cover most of the costs. But to avoid political backlash, it’s important to make them available to those who need them most. In order for obesity drugs to expand into other diseases, such as cardiovascular disease, maintaining goodwill will be crucial. Like diabetes, obesity could be the start of another 100-year industry. ■
Read more from our global business columnist Schumpeter:
It’s time for Alphabet to spin off YouTube (February 23)
Tech companies with artificial intelligence are giving modern warfare a new shape (February 16)
What would Joseph Schumpeter think of Apple? (February 9)
