How Ozempic and Weight Loss Drugs Are Reshaping This Country’s Economy

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 massive that the corporate is reshaping the Danish economic system.

The cause: Ozempic and Wegovy, two weight reduction medicine made by Novo Nordisk which were proclaimed as revolutionary within the area of weight problems.

The firm’s booming success now explains nearly 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 scale of the Danish economic system. Its hovering share value has made it the second most dear public firm in Europe, after the posh items group LVMH.

The firm’s shadow is so expansive that Danish economists are actually 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 economic system.

While Denmark, a rustic of beneath six million folks, isn’t any stranger to globally vital firms, such because the transport big Maersk and the toy firm Lego, the impression 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 yr, two-thirds of Denmark’s financial progress could possibly 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 information.

And the impression has grown much more stark: When evaluating financial output within the first quarter of this yr with a yr in the past, “without the pharmaceutical industry, there was almost no growth,” Mr. Petersen added. The Danish economic system grew 1.9 p.c over that interval, with 1.7 share factors of that contributed by pharma.

Denmark is the house of different pharmaceutical firms, however Novo Nordisk has far outpaced different Danish drug makers. The firm’s income final yr was about 10 instances that of the subsequent largest Danish pharmaceutical firm, Lundbeck. For a very long time, Novo Nordisk was nearly single-minded in its deal with tackling diabetes. But its new weight-loss medicine are actually 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 p.c to 39 billion Danish kroner, about $5.7 billion, within the first half of the yr, 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 carefully on the affect of the pharmaceutical business within the spring, after they had been analyzing the gross home product information for the fourth quarter of 2022 and noticed the massive impact.

Later this week, when the company publishes detailed financial output information for the second quarter, it’ll embody, for the primary time, a particular part detailing the impression of the pharmaceutical business on the economic system, Mr. Petersen mentioned.

Even although Denmark’s pharmaceutical business, led by Novo Nordisk, has had a considerable impression on financial progress information, 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 it’s helpful to supply the extra breakdowns within the financial information, 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. information isn’t a “good signal” for the general enterprise 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, based on 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 may be an affect on Denmark’s forex.

“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 trade 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 conserving the Danish rate of interest barely decrease than the one within the eurozone — at the moment 0.4 share level decrease than the E.C.B.’s fee — 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 develop into too depending on Novo Nordisk, with fretful comparisons to the destiny of the Finnish economic system when Nokia misplaced its dominance within the cellphone business. There are additionally issues 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 economic system.

The time period originated after the Dutch found huge pure gasoline reserves, resulting in a big enhance in exports within the Nineteen Sixties. It prompted the nation’s forex to soar, within the course of making different exports costly and uncompetitive and hampering the general Dutch economic 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, nevertheless, than negatives for the Danish folks relating to Novo Nordisk. The firm’s recognition may draw consideration to the nation, its training system and medical business, in addition to growing the federal government’s mushy energy. If it helps preserve Denmark’s high-wage economic system, it’ll additionally push different firms to be extra progressive and environment friendly to remain aggressive.

Mr. Pedersen grew up when the nation had a present account deficit and recollects painful authorities fiscal insurance policies to fight it. “Those were harsh times,” he mentioned. The present state of affairs “gives a lot of economic policy freedom, no doubt about that.”

Jasmina Nielsen contributed analysis from Copenhagen.