2011 MM&M Company of the Year: Novo Nordisk

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MM&M Company of the Year: Novo Nordisk
MM&M Company of the Year: Novo Nordisk
It seems fitting that Novo Nordisk's logo features that blue bull, which happens to be the embodiment of an ancient Egyptian god of science and art but could just as well be a stand-in for Wall Street's taurine animal totem. With operating profit up 24% for the first nine months of 2010, this fusty 85-year-old Danish firm, owned by a nonprofit foundation and known mainly for producing a type of medicine invented 90 years back, has become one of the hottest stocks in the pharma sector.
Novo Nordisk's steady focus on diabetes has made it a fast-growing powerhouse, posting jaw-dropping sales figures and hiring as the rest of the sector downsizes. Sales of Novo Nordisk's analog insulins, accounting for 42% of overall sales, have more than tripled in the past five years, and the company now boasts half of the global market for insulins.
Last year, it launched Victoza, a GLP-1 drug that swiftly bested rival Byetta, from Lilly and Amylin. Novo Nordisk now expects Victoza to become a blockbuster in 2012 and, with FDA encouragement, restarted clinical trials for a possible obesity indication.
If that weren't audacious enough, obesity being a kind of pharmacological graveyard of empires, the firm is also working on stem cells toward treatments they hope could lead to a cure.
“We try to understand the needs of the people with diabetes and, based on that, how we can develop our products and administer our products in a way that makes their lives more easy,” says president and CEO Lars Rebien Sørensen. “And as we've been working on it for almost 90 years we've been practicing a lot.”
That might sound like standard customer relationship management boilerplate, but consider that Novo Nordisk introduced NovoPen, the first insulin pen, in 1985, and popularized pens in the US.
“It's very personal to the person with diabetes because they use it sometimes three or four times a day, so administration becomes a barrier, a convenience issue,” says Sørensen. “That's why we invented the pen systems, so that instead of having a product that looked like a very medicinal type of therapy with a vial and a syringe, you put a pen in your pocket and you could have your insulin with your meal and you wouldn't have to feel socially excluded.”
Though renown for clever marketing efforts making great use of digital channels—racer Charlie Kimball's Twitter feed, for example, or the WhereHaveYouFlexed contest for FlexPen – the company's advertising budget is a shadow of those boasted by competitors like Lilly and Sanofi-Aventis. “Marketing is obviously extremely important in terms of getting across the virtues of our products,” says Sørensen. “But in reality, what we'd like to convey is credibility and trust in our products. We're dealing with chronic disease, so we're building lifelong relationships with our customers. They use our products for life and their lives depend on them. So, it's not savvy marketing or gimmicks but very serious messages we're trying to convey. But we also realize that to get that across you have to cut through a lot of noise, so it has to be combined with some stopping power and novelty.”
While they may go easy on the advertising, the company boasts a world-class sales force—one which has played a large role in helping it carve out a 42% share of the US insulin market. Novo Nordisk ramped up its sales force rapidly starting in 2000, when it had a mere 165 US reps, to compete with Lilly.
“We started saying, ‘This is not going to work. We have to either partner or expand our sales force.' So, we moved rapidly to 1,000 and then moved on from there.”
At around the same time, says Sørensen, Lilly shifted focus away from the diabetes market in favor of its suddenly lucrative CNS portfolio.
“Obviously it was important for us to get a better foothold in the US, but we struggled for years, because Lilly was a very important player here and had very good relationships with and educated most of the endocrinologists,” says Sørensen. “So, their products had tremendous brand loyalty. They became very successful in the CNS area with Prozac and later Zyprexa, and that created a vacuum that allowed us and Sanofi-Aventis to enter into the market, with a combination of the right people, the right leadership and an expansion of sales and marketing. And now we're not going to give it up again.”
The company saw sales increase 25% in 2009 for North America, which, in contrast to most disease categories, is a huge growth market for diabetes care. In 2008, Novo Nordisk announced an expansion of its LEED Silver-certified US headquarters in Princeton to accommodate a 150% increase in employees based there over the previous five years, and this year the firm said it would invest $73 million in a Clayton, NC manufacturing plant to meet demand for its insulin delivery systems, creating 205 jobs in the process. The scale of diabetes' advance in the US, while great for sales of Novo Nordisk's products, is daunting.
“In my view, it's the biggest public health problem we've ever faced in the world,” he says, and faced with numbers like that, it's hard to dismiss it as hyperbole. There are, he notes, more legs lost to diabetes in India— 40,000 a year—than to landmines all over the world each year. There are 23 million people in the US with diabetes, according to the American Diabetes Association, and about 90% of those cases are type 2 diabetes, which is caused by a combination of genetic predisposition and diet (another 57 million Americans are pre-diabetic).
“But we have to realize that there is a group of individuals that, regardless, continues to put on weight seriously, so much that at a certain point it's irreversible and for health reasons they need intervention,” says Sørensen. Right now, he adds, their only real option is bariatric surgery. That group—around 20 million people in the US with a body mass index of 35 or more, dyslipidemia and hypertension—is the group Novo Nordisk would target for an obesity indication for Victoza, which is already marketed with language suggesting that it “may help lower your weight.”
Sørensen, who cycles 10 miles to work in suburban Copenhagen, is qualified to talk about the lifestyle changes needed to head off such grim forecasts for diabetes, and he's hopeful that we can change our unhealthful ways, but he also sees hope in the science. When he took over as CEO 10 years ago, Sørensen vowed that the company would find a cure in his time at the helm. He now concedes that was a bit premature. “I think it's still 10, 15 years into the future,” he says, pointing to the company's work with embryonic stem cells to understand how they become insulin-producing cells. “It's not inconceivable.”
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