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Obesity drugmaker’s expansion raises dominance worries for Denmark

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Soaring sales of celebrity-endorsed pharmaceuticals have sparked fears that Denmark’s economy risks a similar fate to its Nordic counterpart Finland, whose over-reliance on Nokia led to a lost decade when the phonemaker’s fortunes turned.

Ozempic, a diabetes treatment that celebrities take to lose weight, and Wegovy, an anti-obesity pill, have propelled Novo Nordisk to become Europe’s most valuable company and single-handedly stopped Denmark from falling into recession.

At $410bn, Novo Nordisk’s market capitalisation is now larger than Denmark’s annual GDP of $400bn last year, raising concerns among officials and business figures that the country’s fortunes have become too closely tied to a single company.

“The way that we look at it is that in Denmark we have a two-speed economy: the pharmaceutical industry — and the rest,” said Thomas Harr, chief economist at Denmark’s central bank. “The risk is that you think the economy is performing better than it is.”

“Novo is so fantastically successful, and that is great for it and its shareholders. But for Denmark, I worry about what happens if it goes wrong,” said a leading business executive. “Finland ended up with a lost decade when Nokia had its problems.”

After it found success during the first wave of mass adoption of mobile phones, handset maker Nokia’s profits collapsed from the 2000s onwards after the release of Apple’s iPhone.

At its peak, the company provided a quarter of Finland’s corporate tax revenues and accounted for 4 per cent of GDP. With that sharply reduced, the Nordic economy struggled to grow at all during the 2010s.

For more than a decade, Novo Nordisk has been among Denmark’s biggest companies, thanks to its focus on diabetes drugs. But in recent years its valuation, profits and sales have soared — first on the back of Ozempic’s success and then that of Wegovy, which directly targets obesity.

Denmark’s economy expanded by 1.7 per cent in the first half of this year compared with the same period in 2022. But stripping out the pharmaceutical sector — which is dominated by Novo Nordisk — GDP would have fallen by 0.3 per cent.

GDP figures for the third quarter are due out on Friday.

A Novo Nordisk factory. The company’s market capitalisation is now larger than Denmark’s annual GDP in 2022 © Sergei Gapon/AFP/Getty Images

The impact on GDP is so broadly acknowledged that the country’s statistics agency produces data both with and without the pharmaceuticals sector. But others believe Denmark’s economy would prove resilient even if Novo Nordisk were to see popularity of its best-selling drugs wane.

Chief among the reasons is that much of Novo Nordisk’s impact on GDP comes as a result of the drugmaker’s production overseas, not domestically.

Jonas Dan Petersen, chief adviser on national accounts at the statistics agency, said: “The big revenues show up in GDP but they don’t have such an explosive effect on employment.”

Jakob Ellemann-Jensen, Denmark’s vice-prime minister and minister for economic affairs, also cited these “significant differences” between Denmark’s current predicament and that faced by Nokia and Finland.

Helge Pedersen, chief economist of the biggest bank in the Nordics, Nordea, said he viewed the success of Novo Nordisk and other Danish pharmaceuticals group as a “huge benefit” and that it did not create an “over-reliance”.

Olli Rehn, who is on leave from his job as governor of the Finnish central bank to run for president, called it a “pertinent question”.

But he added that Denmark had “the more diversified industrial structure and [small and midsized enterprise] dominance”.

Finnish phonemaker Nokia’s profits collapsed after the release of Apple’s iPhone © Francis Dean/Corbis/Getty Images

Novo Nordisk’s roots in Denmark are strong, however. About 40 per cent of its employees are based there. It added 3,500 jobs in Denmark last year, taking the total to 21,000.

The drugmaker also made more than DKr10bn ($1.4bn) of investments in production in the country last year and paid taxes of more than DKr15bn, or about 1 per cent of the total that the country collected in 2020.

Pedersen said the big risk was that policymakers could overlook how other companies outside the pharmaceutical sector are faring.

“There are companies that are struggling. You shouldn’t forget these companies when thinking about fiscal or labour market policy. The majority of Danish companies aren’t so competitive,” he said.

Alex Stubb, a former Finnish prime minister and another presidential candidate, said there was relatively little Copenhagen could do about the risks.

“All you can do is stay away. When Nokia’s handheld phones started to crumble, the government was made aware,” he said. “But there’s not much you can really do. You welcome the tax revenue. But if you start meddling with what the company does, you’re not doing your job.”

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