After 100 years of comparatively quiet existence as a maker of diabetes medicine, the Danish agency Novo Nordisk has all of the sudden grown so large that the corporate is reshaping the Danish financial system.
The purpose: Ozempic and Wegovy, two weight reduction medicine made by Novo Nordisk which have been proclaimed as revolutionary within the area of weight problems.
The firm’s booming success now explains virtually all of Denmark’s current financial progress, and the surge in abroad gross sales within the medicine is prompting the Danish central financial institution to maintain rates of interest decrease than it in any other case would, economists say. In the previous few weeks, Novo Nordisk’s market worth has exceeded the dimensions of the Danish financial system. Its hovering share worth has made it the second most precious public firm in Europe, after the posh items group LVMH.
The firm’s shadow is so expansive that Danish economists at the moment are debating whether or not the nation must publish one other set of financial statistics that strips out Novo Nordisk. In different phrases, there’s Novo Nordisk, and there’s the remainder of the financial system.
While Denmark, a rustic of below six million individuals, is not any stranger to globally important corporations, such because the transport large Maersk and the toy firm Lego, the affect of Novo Nordisk on financial statistics is exclusive, economists say.
“We’ve never been in a situation like this in Denmark before where one single company has played such a large role,” mentioned Jens Naervig Pedersen, an economist at Danske Bank.
Last 12 months, two-thirds of Denmark’s financial progress might be attributed to the pharmaceutical business, mentioned Jonas Dan Petersen, a chief adviser at Denmark’s nationwide statistics company, which doesn’t present company-specific knowledge.
And the affect has grown much more stark: When evaluating financial output within the first quarter of this 12 months with a 12 months in the past, “without the pharmaceutical industry, there was almost no growth,” Mr. Petersen added. The Danish financial system grew 1.9 % over that interval, with 1.7 share factors of that contributed by pharma.
Denmark is the house of different pharmaceutical corporations, however Novo Nordisk has far outpaced different Danish drug makers. The firm’s income final 12 months was about 10 occasions that of the following largest Danish pharmaceutical firm, Lundbeck. For a very long time, Novo Nordisk was virtually single-minded in its deal with tackling diabetes. But its new weight-loss medicine at the moment are being closely prescribed, significantly within the United States. The U.S. Food and Drug Administration authorized Ozempic as a diabetes treatment in 2017; the company authorized Wegovy in 2021.
Novo Nordisk’s revenue surged 45 % to 39 billion Danish kroner, about $5.7 billion, within the first half of the 12 months, pushed by demand for the medicine. They are so profitable that the corporate is struggling to maintain up with the demand and is limiting provides within the United States, whereas it tries to ramp up manufacturing.
Economists on the Danish statistics company began wanting intently on the affect of the pharmaceutical business within the spring, once they had been analyzing the gross home product knowledge for the fourth quarter of 2022 and noticed the massive impact.
Later this week, when the company publishes detailed financial output knowledge for the second quarter, it can embrace, for the primary time, a particular part detailing the affect of the pharmaceutical business on the financial system, Mr. Petersen mentioned.
Even although Denmark’s pharmaceutical business, led by Novo Nordisk, has had a considerable affect on financial progress knowledge, there hasn’t been a corresponding enhance in employment. Over the previous 5 years, the business has added 3.4 share factors to Denmark’s progress, however simply 0.1 share factors to employment, Mr. Petersen mentioned. That’s why its helpful to offer the extra breakdowns within the financial knowledge, he mentioned.
“Especially for the economists who are trying to analyze the business cycle, this is very hard for them,” he added, as a result of it means the G.D.P. knowledge isn’t a “good signal” for the general business cycle in Denmark.
Part of the reason being that a lot of Novo Nordisk’s manufacturing takes place abroad, for instance within the United States. Still, there are broad advantages for the Danish inhabitants. Novo Nordisk is the largest contributor of company tax in Denmark, a boon for the nation’s public funds.
And the corporate is predicted to solely develop, as a result of there are many potential sufferers. More than 100 million American adults have weight problems, in response to the Centers for Disease Control and Prevention.
With all this cash being made, and anticipated to be made, within the United States, economists say there’s an affect on Denmark’s foreign money.
“You have companies, such as Novo Nordisk, that have a greater need for exchanging foreign currency into Danish kroner, then you start to see an upward pressure emerge on the Danish krone,” Mr. Pedersen of Danske Bank mentioned. But Denmark retains the krone pegged to the euro, and so when the krone rises in worth, “the central bank has to respond,” he added.
The central financial institution has been spending kroner to buy overseas change and increase reserves. Because of those purchases, the central financial institution has additionally elevated the hole between Denmark’s rates of interest and those set by the European Central Bank. By retaining the Danish rate of interest barely decrease than the one within the eurozone — presently 0.4 share level decrease than the E.C.B.’s charge — it ought to discourage overseas traders from holding the krone.
The central financial institution declined to remark for this text.
Some economists in Denmark fear that the nation may grow to be too depending on Novo Nordisk, with fretful comparisons to the destiny of the Finnish financial system when Nokia misplaced its dominance within the cellphone business. There are additionally considerations that so-called Dutch illness may come to Denmark, mentioned Helge J. Pedersen, the chief economist at Nordea, referring to the financial phenomenon when a rustic all of the sudden experiences a big enhance in revenue, which is seemingly good financial news, nevertheless it truly has a detrimental impact on the remainder of the financial system.
The time period originated after the Dutch found huge pure fuel reserves, resulting in a big enhance in exports within the Nineteen Sixties. It prompted the nation’s foreign money to soar, within the course of making different exports costly and uncompetitive and hampering the general Dutch financial system.
“There is a Denmark without Novo Nordisk, and that has to be taken into consideration when coming with recommendations to economic policy and wage agreements,” Mr. Pedersen of Nordea mentioned. “We need to be fairly modest because many Danish companies are also facing severe competition from abroad.”
He sees extra positives, nonetheless, than negatives for the Danish individuals relating to Novo Nordisk. The firm’s reputation may draw consideration to the nation, its training system and medical business, in addition to rising the federal government’s comfortable energy. If it helps preserve Denmark’s high-wage financial system, it can additionally push different corporations to be extra revolutionary and environment friendly to remain aggressive.
Mr. Pedersen grew up when the nation had a present account deficit and remembers painful authorities fiscal insurance policies to fight it. “Those were harsh times,” he mentioned. The present scenario “gives a lot of economic policy freedom, no doubt about that.”
Jasmina Nielsen contributed analysis from Copenhagen.
Source: www.nytimes.com