This is an audio transcript of the Behind the Money podcast episode: ‘Ozempic’s unconventional origins’
Michela Tindera
It’s November, and the FT’s global pharmaceutical editor Hannah Kuchler is in Copenhagen. She’s visiting the headquarters of the drugmaker Novo Nordisk.
Hannah Kuchler
So, this company is changing the world. And I wanted to go to Copenhagen to see its headquarters, to see how the scientists have created these wonder drugs, Ozempic and Wegovy, and what they plan to do next.
Michela Tindera
Both of these drugs, the popular diabetes treatment Ozempic and Wegovy, which was formulated strictly for weight loss, have had a remarkable run recently. But when Hannah gets to Novo Nordisk’s labs, she says that the place where scientists are developing successors to these blockbuster medications looks quite unassuming from the outside.
Hannah Kuchler
So I entered through automatic double doors, and it’s quite underwhelming on the ground floor. We went upstairs and we walked down this incredibly long, white . . . dramatically white corridor. And going off these corridors are these very small labs, they’re like the size of a bedroom, really. And on each side inside the labs, these machines whirring away.
Michela Tindera
As she walks around the lab, her tour guide opens a big glass fridge. It sort of looks like the kind that restaurants use to keep bottles of soda cold, but instead of holding sugary drinks, it’s filled with chemicals.
Hannah Kuchler
So what have we got in this fridge?
Tour guide
So this is actually a lot of different chemicals that are used to produce the peptide. So it’s almost like writing code when you’re doing a software programming.
Hannah Kuchler
So a peptide is a string of amino acids, those building blocks that make up proteins. And a lot of drug discovery is about trying to work out the right protein that does the right thing in your body. And so they test thousands of these, first in dishes, in labs and then in animals, and then, if successful, eventually in humans.
Michela Tindera
Next, Hannah sees a small transparent cabinet where robotic arms move back and forth, swinging bottles full of different molecules into a large machine, sort of like a mini-assembly line.
Hannah Kuchler
OK, so what’s happening in here?
Tour guide
Here, we have some of the (inaudible) apparatus where we can make four times 96 unique molecules in this machine at one go. So that’s something we utilise a lot to produce many variants of new molecules (inaudible).
Michela Tindera
The tour guide tells Hannah that this lab can now use computers and high-tech machinery, like those robotic arms, to do work that just 20 years ago had to be done by hand.
Hannah Kuchler
Labs have just got so much more high tech. This isn’t just like little pipettes and bottles that you would imagine now. Everything is kind of run by computers.
Michela Tindera
All these peptides and molecules and robots — they’re part of a behind-the-scenes look at the science that Novo Nordisk has pioneered to create these drugs Ozempic and Wegovy.
Hannah Kuchler
When this company has just sort of burst on to the scene of importance, both in terms of the industry I cover, pharma, but also actually in terms of broader society. With these drugs, Wegovy and Ozempic, these are the new generation of weight loss and diabetes drugs that have just shown a much more significant weight loss than any previous obesity treatment.
Michela Tindera
Before these drugs came out, the only really effective treatment for obesity was surgery, which can be expensive and dangerous. Now, patients taking Wegovy or Ozempic give themselves a weekly injection. When a drug makes over $1bn a year, it’s known as a blockbuster. But as demand for these drugs soared in 2023, Hannah tells me they quickly sailed far beyond that marker.
Hannah Kuchler
I think Barclays forecasts Wegovy to hit 4.2bn and Ozempic to hit 13.3bn.
Michela Tindera
But getting to this point took decades.
Hannah Kuchler
Usually I think they say the average for a drug is about 10 years from pre-clinical, which is sort of animal testing, to approval. This seems to have been a harder task, taken longer. I think now it’s quite easy to think, oh God, of course these were going to be successful, everyone wants to lose weight, right?
Michela Tindera
While Novo Nordisk has enjoyed this recent explosion of success, the journey to get here has taken a long time, even by the standards of the pharmaceutical industry. So how exactly did they pull it off?
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I’m Michela Tindera from the Financial Times. Today on Behind the Money, we’re looking at how Novo Nordisk’s unique ownership model played a role in its recent success, and whether anything can get in the company’s way in the future.
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Hi, Hannah. Welcome to the show.
Hannah Kuchler
Thanks so much for having me.
Michela Tindera
So let’s start from the very beginning, which for Novo Nordisk is quite a while ago. In the 1920s, actually, that’s when the company started out making insulin. So, Hannah, tell me more about how this all began.
Hannah Kuchler
So, the more romantic people at Nov Nordisk like to say that the company was formed out of a love story. And this is because there was this Nobel Prize winner, August Krogh, and his wife, who was also a doctor, Marie, had diabetes. They heard about this scientist in Toronto who had discovered insulin, which is the bedrock of treatment for diabetics. And Marie urged her husband, please go find this.
Michela Tindera
So Marie’s husband, August, travels to Toronto to find this scientist, and when he gets there and meets them, he ends up getting their permission to reproduce this new medicine, insulin, and sell it in Scandinavia. To do this at scale. August and a couple others create what later becomes Novo Nordisk, but with the permission that August receives from the Canadian scientist, there’s also an important stipulation in their agreement.
Hannah Kuchler
Now, the interesting thing about this is that the Canadian scientists, they were very generous and they gave him the license to produce this. But they also said, we don’t want you to make the quote that I was told recently was, no nasty profits out of this.
Michela Tindera
To avoid any so-called nasty profits, Novo Nordisk founders created a charitable organisation which would take money the company made from insulin sales, and invest it back into scientific research. Today, that organisation is called the Novo Nordisk Foundation. It has 77 per cent of the company’s voting rights and owns 28 per cent of the company’s shares. And Hannah points out that this is a distinct ownership structure for a pharma company.
Hannah Kuchler
It’s a common structure in Denmark. But in the pharma industry, it is unusual. I mean, most big pharma companies are owned purely by their shareholders. Sometimes they’ll be wealthy families, but mainly most big companies that are owned by the shareholders on the public market.
Michela Tindera
So for Novo Nordisk, the company’s shares are owned in part by the foundation and in part by shareholders on the public market. People inside the company have told Hannah that this structure of foundation ownership has allowed the business to take a much longer-term view when it comes to planning.
Hannah Kuchler
That 77 per cent of the votes, right? Like you don’t have to worry about a shareholder rebellion basically, ever, because 77 per cent of the votes are held by a foundation. That’s kind of like on your side. So of course, another thing about having a controlling shareholder like a foundation is that you can’t really easily be bought. But that certainly, I think has probably helped the company over the years, feel more secure in its investment. It’s not had anyone creeping up behind it.
Michela Tindera
A key example of that long-term approach to research: Wegovy and Ozempic.
Hannah Kuchler
Obesity was not a popular area to invest in. When they started investing it in the 90s, they it had a history of being an area where the drugs had not been very effective, where some had been pulled from the market because of dangerous side effects. And actually, a lot of people were not touching this arrow with a barge pole, and yet they were kind of able to double down, perhaps without the same kind of scrutiny for short term, midterm returns from public shareholders. The foundation believed in letting them having that space.
Michela Tindera
It was a risky space to bet on. And Hannah tells me that it took decades of research and testing to receive US Food and Drug Administration approval. Ozempic got it in 2017, and then Wegovy a few years later, after a trial, showed that patients taking the drug could lose an average of 15 per cent of their body weight.
So, Hannah, we just heard about how Novo Nordisk spent decades researching these drugs starting in the 1990s, and then finally getting approval for Wegovy just a couple of years ago. So what allowed them to do that, to take all that time? Was it the foundation ownership?
Hannah Kuchler
Oh, pharmaceutical innovation takes a long time, but I think the foundation ownership did play a big role here, because it means that the company, even though it is publicly listed, is maybe much less sort of subject to the whims of the market. I mean, we’ve seen, for example, actually quite recently, a company like Pfizer got really punished by the stock market because, hey, they had loads of money during Covid, but now the vaccine isn’t selling so well and that volatility gets into the stock price. And when they try and spend some of those proceeds on longer term decisions, they get a bit punished for it. I think Novo Nordisk Foundation kind of protected it from some of that kind of volatility.
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Michela Tindera
The backing from the foundation allowed Novo Nordisk to place an important long-term bet in 2018. It was a bet that would ultimately vault them into becoming the most valuable company in Europe. That year, the company CEO launched a 17,000-person clinical trial to see whether taking Wegovy could cut the risk of serious cardiac events like heart attacks. Now these sorts of trials are crazy expensive. They cost companies hundreds of millions of dollars to run. But this one paid off.
Hannah Kuchler
So in all this, this incredibly important trial result, just the top line of it. The really initial results landed in, went across the wires, and it surprised a lot of people and really, really excited investors.
News clip 1
Shares of Novo Nordisk are up sharply this morning.
News clip 2
Novo Nordisk says its obesity drug Wegovy has a clear medical benefit in addition to weight loss.
News clip 3
A new study shows the popular weight loss drug Wegovy can also reduce the risk of a heart attack or stroke by 20 per cent.
Hannah Kuchler
They said that in this population who are overweight, obese and had some cardiovascular disease already, they cut this risk of serious events by 20 per cent, which is a big drop. And it’s a big drop in something that’s really expensive, right? When you get rushed to hospital, it’s very, very expensive to treat something like a heart attack. And so the shares spiked and they just kept on running.
Michela Tindera
After Novo Nordisk released the results of their big bet, the company’s shares continued to climb. And in September, their market cap surpassed the French luxury goods conglomerate LVMH, making Novo Nordisk the most valuable company in Europe. Novo is reaching new heights, but this level of success also raises questions about the challenges that lie ahead.
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Michela Tindera
As much as Novo Nordisk has performed so well as a company recently, it still has huge hurdles to make this work long term. Hannah, walk me through, what would you say are the biggest challenges that the company’s facing heading into 2024?
Hannah Kuchler
This is not an easy market. The most immediate hurdle is it still doesn’t have enough supply, right? So it has to scale back up. And then as you get more supply, you hit up against the fact that there are still a lot of payers who are reluctant, whether health insurance or government-funded health insurance, either in the US or health systems in the UK and Europe, who are reluctant to foot the bill, partly because, you know, the populations decided could be incredibly expensive.
Michela Tindera
OK, so it sounds like the key areas they need to work on are increasing the supplies of their drugs, and then also needing to work on convincing insurance companies and the like to actually pay for these drugs. As a quick reminder, Wegovy sells in the US for a list price of over $1,300 a month. So let’s talk about the supply of the drug first. What are they doing now to scale up?
Hannah Kuchler
So the company knew that these drugs were important. They worked on them for 30 years, but they did not know how big they were going to be. So the supply that they sort of geared up for was nowhere near this kind of demand. Certainly they didn’t expect the demand that’s all fuelled by people on TikTok and celebrities like Kim Kardashian being linked with the drug. She denies it. So they didn’t anticipate correctly in the first place. And so the company has been really heavily investing in increasing supply. They’re even building like a big plant in Denmark. They’re not going for somewhere where, you know, you can pilot high and sell it cheap. They want something where they can really control the process and be close to it. And so as the supply scales up, then they can do things like roll it out in more countries, because at the moment it’s only really available in the US and in a very restricted way in like four or five European countries.
Michela Tindera
Yeah. So let’s talk a bit about the issue of health insurers, government payers being reluctant to foot the bill. Why is that right now? And how is Novo Nordisk looking to change that?
Hannah Kuchler
So Novo Nordisk is really hoping that this trial was all about cardiac outcomes will make a big difference in its argument with payers. There are also a couple of other trial results coming down the line. I think most notably looking at its effect on chronic kidney disease, which again, is really expensive as you think of people go to dialysis and things like that. And so when they have that evidence, they can go back to insurers and really have the argument. I think that there’s a big task ahead of them, because as much as lots of people think that preventive health is the way we should go, right? We should take drugs in order to make sure things don’t happen, rather than only be good at treating people when they arrive in an ambulance. It’s still quite difficult because you got to convince people to pay a lot of money now for something later.
Michela Tindera
Mmm, so how are they looking to do that?
Hannah Kuchler
So one of the things that Novo is looking at on this is contracts, flexible-pricing contracts where they would share that risk so they might supply the drug and health systems that might have to pay later, which I think is a really interesting, innovative idea. It’s only actually been used previously for some of the incredibly high-priced drugs for like a rare disease. There are these drugs where it costs like $2mn, but it’s a one-off, and once you take it, then you wipe out huge amount of cost for the next 10 years. Those have had sort of payment plans for insurers. So be really interesting to see whether that changes the game for some health systems.
Michela Tindera
Mmm. Now there’s another challenge that Novo Nordisk is facing that’s pretty much outside of its control, because they’re not the only pharma company working on anti-obesity drugs. So who are their main competitors and what are they up to?
Hannah Kuchler
So yeah, Novo Nordisk has this one big competitor in Eli Lilly, and they had this head start. But to some extent they didn’t get to make the most of it because of their supply problems. So Eli Lilly has Mounjaro which is the Ozempic equivalent, right. It’s targeted at diabetes. And then they recently got that Zepbound approved for obesity. So that’s the same active substance. And it’s kind of their equivalent of Wegovy. Zepbound actually showed in the clinical trial even more significant weight loss than Wegovy. But Novo Nordisk doesn’t seem to be massively worried about that. The supply problems are everything. I think people are quite happy to lose 15 per cent of their body weight rather than 20 odd at the start. Eventually, I think people think this market will become something where you kind of come in and depending on how much you weigh, how much you need to lose quickly, you might be directed towards different drugs.
Michela Tindera
So looking ahead into 2024, what’s next for the company? What should we be looking out for?
Hannah Kuchler
So I think that the sales of these drugs, Ozempic and Wegovy, are likely to continue to soar in 2024, especially as they manage to scale up supply. There’s a lot of demand. As we’ve seen, it’s almost been so constrained. In the US there’s still tons of runway. In other countries, in Europe, they barely touch the demand at all. So I think the sales will definitely continue to soar. But the question is whether the stock price will also continue to soar or is all that priced in? It’s now the biggest company by market cap in Europe, so maybe there isn’t quite so much runway with the stock price. And then internally they’ve got to balance dealing with today’s challenges, be it the supply issues or trying to get more insurance payers to cover the drug while not getting completely distracted from trying to keep up with competitors and, and make sure that they’re ahead of the game and maintain that long-term view to invest wisely in the future.
Michela Tindera
Mmm, so do you think that Novo Nordisk’s long-term approach to growth will continue to be an asset for the company in 2024?
Hannah Kuchler
I think in general, a long-term approach, especially to an industry that does take a long time to go through clinical trials and regulatory procedures and things make sense. Of course, there’s the risk that you go down a long, unfruitful path for a long time, and that’s always maybe an extra edge to that risk when you have a lot of money.
Michela Tindera
Is there something other companies can learn from Novo’s foundation ownership structure? I mean, I wonder if that could be a benefit to other companies down the line.
Hannah Kuchler
I mean, perhaps it could. Obviously, it’s quite rooted in Danish culture. There are lots of other foundation-owned companies in Denmark, and you can’t imagine a publicly listed company somehow managing to transform itself into a foundation. But maybe for new companies coming up, it’s an interesting model as people discuss ideas like (inaudible) and things and saying, OK, how can you both invest money from drugs like this or products in philanthropy? But also help the company by having a kind of a longer-term view than the average day trader.
Michela Tindera
Hannah, thanks so much for being here.
Hannah Kuchler
Thank you for having me.
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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. Topher Forhecz is our executive producer. Sound design and mixing by Sam Giovinco. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.
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