After 100 years of relatively quiet existence as a maker of diabetes drugs, the Danish firm Novo Nordisk has suddenly grown so big that the company is reshaping the Danish economy.<\/p>\n
The reason: Ozempic and Wegovy, two weight loss drugs made by Novo Nordisk that have been proclaimed as revolutionary in the field of obesity.<\/p>\n
The company\u2019s booming success now explains almost all of Denmark\u2019s recent economic growth, and the surge in overseas sales in the drugs is prompting the Danish central bank to keep interest rates lower than it otherwise would, economists say. In the past few weeks, Novo Nordisk\u2019s market value has exceeded the size of the Danish economy. Its soaring share price has made it the second most valuable public company in Europe, after the luxury goods group LVMH.<\/p>\n
The company\u2019s shadow is so <\/span>expansive that Danish economists are now debating whether the country needs to publish another set of economic statistics that strips out Novo Nordisk. In other words, there\u2019s Novo Nordisk, and there\u2019s the rest of the economy.<\/p>\n While Denmark, a country of under six million people, is no stranger to globally significant companies, such as the shipping giant Maersk and the toy company Lego, the impact of Novo Nordisk on economic statistics is unique, economists say.<\/p>\n \u201cWe\u2019ve never been in a situation like this in Denmark before where one single company has played such a large role,\u201d said Jens Naervig Pedersen, an economist at Danske Bank.<\/p>\n Last year, two-thirds of Denmark\u2019s economic growth could be attributed to the pharmaceutical industry, said Jonas Dan Petersen, a chief adviser at Denmark\u2019s national statistics agency, which doesn\u2019t provide company-specific data.<\/p>\n And the impact has grown even more stark: When comparing <\/span>economic output in the first quarter of this year with a year ago, \u201cwithout the pharmaceutical industry, there was almost no growth,\u201d<\/em> Mr. Petersen added. The Danish economy grew 1.9 percent over that period, with 1.7 percentage points of that contributed by pharma.<\/p>\n Denmark is the home of other pharmaceutical companies, but Novo Nordisk has far outpaced <\/span>other Danish drug makers. The company\u2019s revenue last year was about <\/span>10 times that of the next largest Danish pharmaceutical company, Lundbeck. For a long time, <\/span>Novo Nordisk was almost single-minded in its focus on tackling diabetes. But its new weight-loss drugs are now being heavily prescribed, particularly in the United States. The U.S. Food and Drug Administration approved Ozempic as a diabetes medication in 2017; the agency approved Wegovy in 2021.<\/p>\n Novo Nordisk\u2019s profit surged 45 percent to 39 billion Danish kroner, about $5.7 billion, in the first half of the year, driven by demand for the drugs. They are so successful that the company is struggling to keep up with the demand and is limiting supplies in the United States, while it tries to ramp up production.<\/p>\n Economists at the Danish statistics agency started looking closely at the influence of the pharmaceutical industry in the spring, when they were analyzing the gross domestic product data for the fourth quarter of 2022 and saw the large effect.<\/p>\n Later this week, when the agency publishes detailed economic output data for the second quarter, it will include, for the first time, a special section detailing the impact of the pharmaceutical industry on the economy, Mr. Petersen said.<\/p>\n Even though Denmark\u2019s pharmaceutical industry, led by Novo Nordisk, has had a substantial impact on economic growth data, there hasn\u2019t been a corresponding increase in employment. Over the past five years, the industry has added 3.4 percentage points to Denmark\u2019s growth, but just 0.1 percentage points to employment, Mr. Petersen said. That\u2019s why its useful to provide the additional breakdowns in the economic data, he said.<\/p>\n \u201cEspecially for the economists who are trying to analyze the business cycle, this is very hard for them,\u201d he added, because it means the G.D.P. data isn\u2019t a \u201cgood signal\u201d for the overall business cycle in Denmark.<\/p>\n Part of the reason is that much of Novo Nordisk\u2019s production takes place overseas, for example in the United States. Still, there are broad benefits for the Danish population. Novo Nordisk is the biggest contributor of corporation tax in Denmark, a boon for the country\u2019s public finances.<\/p>\n And the company is expected to only grow, because there are plenty of potential patients. More than 100 million American adults have obesity, according to the Centers for Disease Control and Prevention. <\/p>\n This month, the results of a five-year trial found that Wegovy slashed the risk of serious heart problems, a finding that could increase pressure on insurers to cover the drugs, and further expand their reach.<\/p>\n With all this money being made, and expected to be made, in the United States, economists say there is an influence on Denmark\u2019s currency.<\/p>\n \u201cYou 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,\u201d Mr. Pedersen of Danske Bank said. But Denmark keeps the krone pegged to the euro, and so when the krone rises in value, \u201cthe central bank has to respond,\u201d he added.<\/p>\n The central bank has been spending kroner to purchase foreign exchange and building up reserves. Because of these purchases, the central bank has also increased the gap between Denmark\u2019s interest rates and the ones set by the European Central Bank. By keeping the Danish interest rate slightly lower than the one in the eurozone \u2014 currently 0.4 percentage point lower than the E.C.B.\u2019s rate \u2014 it should discourage foreign investors from holding the krone. <\/p>\n The central bank declined to comment for this article.<\/p>\n Some economists in Denmark worry that the country could become too dependent on Novo Nordisk, with fretful comparisons to the fate of the Finnish economy when Nokia lost its dominance in the cellphone industry. There are also concerns that so-called Dutch disease could come to Denmark, said Helge J. Pedersen, the chief economist at Nordea, referring to the economic phenomenon when a country suddenly experiences a large increase in income, which is seemingly good economic news, but it actually has a negative effect on the rest of the economy.<\/p>\n The term originated after the Dutch discovered vast natural gas reserves, leading to a large increase in exports in the 1960s. It caused the country\u2019s currency to soar, in the process making other exports expensive and uncompetitive and hampering the overall Dutch economy.<\/p>\n \u201cThere is a Denmark without Novo Nordisk, and that has to be taken into consideration when coming with recommendations to economic policy and wage agreements,\u201d Mr. Pedersen of Nordea said. \u201cWe need to be fairly modest because many Danish companies are also facing severe competition from abroad.\u201d<\/p>\n He sees more positives, however, than negatives for the Danish people when it comes to Novo Nordisk. The company\u2019s popularity could draw attention to the country, its education system and medical industry, as well as increasing the government\u2019s soft power. If it helps maintain Denmark\u2019s high-wage economy, it will also push other companies to be more innovative and efficient to stay competitive.<\/p>\n