🌐 Europe's Most Valuable Company

Read time: 5 minutes

Good morning! It's Tuesday, April 9th. Today, we're looking at the drug company that saved Denmark from a recession.

THE FEATURE

🌐 Europe's Most Valuable Company

Everyone has heard of Ozempic by now. What started as a niche celebrity weight-loss hack has grown into a global obsession. 

That global demand for Novo Nordisk's weight-loss drug can't be understated. 

According to Denmark's largest bank, Novo's Ozempic boom saved the nation's GDP from no growth in 2023! If you had removed Novo from the equation in 2023, Denmark would have had a recession. 

Beyond Denmark, Novo has surged to the #1 spot for Europe's largest company by market cap

So, What's the Business?

Novo Nordisk was founded in 1923 to begin producing and selling insulin in Scandinavia. 

The company was still best known for its insulin formulations a hundred years later. But now, its diabetes care and weight loss products are taking over. 

Last year, Ozempic, designed to regulate blood sugar, accounted for 41% of Novo's $34B in total sales. And Wegovy, the Ozempic spinoff tailored for weight loss, brought in $4.5B. 

In addition to Ozempic and Wegovy doubling Novo's revenue, the two new products are insanely profitable. 

A study from JAMA Network found that Ozempic could be profitably produced for less than $5 a month. The active drug in Ozempic and Wegovy is semaglutide and costs just ~7 cents a dose to make, bringing the manufacturing cost to 29 cents for a month's supply.

While cheap to produce, American consumers pay a hefty $1,000 a month for four weekly injections. 

The hype around Novo's weight loss drugs began in 2021 when Wegovy received FDA approval to treat obesity. Wegovy was the first weight loss drug to be green-lit by the FDA in eight years. With celebrity buzz from the likes of Elon Musk and Oprah, Wegovy shortages followed, leading doctors to prescribe Ozempic as an alternative. 

After receiving FDA approval for Wegovy in 2021, Novo's market cap grew 56% to $255B that year. Today, its market cap sits at a stunning ~$570B!

The Innovation: First Mover Effect

During the first clinical trials for Ozempic, Novo found that participants lost 15% of their body weight. 

This wasn't an intended effect. However, the drug obviously had a powerful impact on reducing cravings and thereby causing weight loss. 

Novo executives hotly debated entering the weight loss industry, considering rivals' past failed attempts to capture the diet-drug market. Ultimately, they decided to go for it, believing they had a unique edge: their specialty, diabetes, was inherently intertwined with obesity.  

Novo's stock surge is due to the knowledge that the company's market dominance isn't going anywhere. Their patent on semaglutide goes until 2032, meaning they can keep getting away with their $1,000 monthly prescriptions. 

Key Observation: Miracle Drugs Shift Markets

As a final note, take a look at Ozempic's impact on American companies in just this year: 

• Obesity drug developer Viking Therapeutics saw its shares tumble after NVO set a new bar for weight loss drugs.

• WeightWatchers stock fell to an all-time low last month with Oprah's departure from the brand amid the "age of Ozempic."

• Eli Lilly has entered the weight loss craze with its drugs Zepbound and Mounjaro, which has made Citi analysts bullish on the stock.

• Costco is now offering $179 Ozempic prescriptions through its low-cost healthcare partner, Sesame.

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