# 1 Novo Nordisk - Changing diabetes

Novo Nordisk (NOVO/NVO) is a Danish pharmaceutical company which manufactures drugs for diabetes, obesity and other rare diseases. The company has recently become the largest European company by market capitalization and accounts for up to 3.5% of Denmark’s GDP.

While I was writing the first newsletter of the coming trilogy on Novo Nordisk I realized the problem the solve (the job they do) its not straightforward. Therefore, the purpose of this newsletter is to introduce the problem society is facing regarding diabetes and obesity.

DISCLAIMER: This article is not a recommendation to buy or sell any financial instrument, the content is educational and my personal opinion. Each person has to make his own analysis. Any action or decision you take as a result of viewing this article is your sole responsibility.

Note: All visual material in this article is from Novo Nordisk, unless otherwise stated.

The coming pandemics?

It is important to understand the ongoing trends behind diabetes and obesity as Novo Nordisk’s core business is based on addressing health conditions.

Diabetes is a chronic disease that affects how your body turns food into energy. It breaks down carbohydrates in food into glucose. Glucose is the body's main source of energy. Insulin is a hormone made by the pancreas which helps glucose get into your cells to be used for energy.

With diabetes, your body either doesn't make enough insulin or doesn't use insulin properly. This causes glucose to build up in your bloodstream. Over time, having too much glucose in your blood can lead to health problems, such as heart disease, stroke, blindness, kidney failure, and nerve damage.

There are two main types of diabetes: type 1 and type 2.

• Type 1 diabetes is an autoimmune disease that causes the body to attack its own insulin-producing cells in the pancreas. This results in little or no insulin production. There is no cure for type 1 diabetes so patients need to take insulin every day to manage their blood sugar levels.

• Type 2 diabetes is the most common form of diabetes. It occurs when the body becomes resistant to insulin or doesn't make enough insulin. There is a high correlation between habits and lifestyle and type 2 diabetes prevalence. Hence, type 2 diabetes can often be managed with lifestyle changes, such as losing weight, eating a healthy diet, and exercising regularly. However, some people with type 2 diabetes may also need to take medications or insulin.

To treat diabetes, type 1 diabetes patients usually take one injection of long-acting insulin every day, supplemented by fast acting insulin injections after certain meals for a better control of glucose levels. Type 2 diabetic patients just need one sigle dose of long-acting insulin unless the illness condition is too deteriorated.

537 million people were estimated to have diabetes in 2021 (roughly 10% of the world’s population) and it is expected to reach 784 million of patients by 2045. However, estimations indicate only 50% patients are diagnosed because diabetes in its early stages does not have any remarkable symptoms.

Since the 1960s the amount of people diagnosed with type 2 diabetes has dramatically increased not only because of the lifestyle change but also because of genetic factors (type 2 diabetes runs on families) and aging of the population.

In a paper called “Obesity and Type 2 Diabetes“, after the review of more than 100 studies, it is concluded that obesity accounts up to 80-85% of the risk of developing diabetes type 2.

Obesity is a global epidemic. According to the World Obesity Organization, 26% of the global population will be overweight and 25% obese by 2035. Public opinion on obesity narrative has been changing and its recognition has improved encouraging patients with that health condition to seek healthcare support.

Following this secular trend, and to prevent type 2 diabetes, Novo Nordisk developed Wegovy - a GLP1 analog - which got FDA approval in 2021 for obesity treatment. Only 2% out of 650 million people affected nowadays are being treated with medication (13 million patients approximately).

Changing diabetes care

Novo Nordisk is a global leader in diabetes treatment, with a 32.7% market share in both insulin and non-insulin therapies, growing at 6.7% CAGR. The company estimated 36.3 million patients are treated through their diabetes medicines, from which 5 million patients access to insulin is granted through Novo Nordisk affordability programmes.

Novo Nordisk diabetes portfolio is splitted in two groups insulin and GLP-1 (glucagon-like peptide 1) as follows:

But what are insulin and GLP-1 drugs? Let’s have a look.

Insulin

Insulin analogues (synthetically produced insulin similar to human one) is the traditional medication diabetics have used to control their sugar levels. There are three types: fast acting, intermediate-acting and long-acting insulin. They differ on the intensity of realese of the active ingredient and its effect duration (how long stays on the organism working as intended). Traditionally, patients have used a combination of different types of insulins to control sugar levels as shown in figure 4.

Diabetes treatment is changing. Type 1 diabetics who can produce insulin will still need insulin analogues which need to be injected daily. However, type 2 diabetics can better control glucose levels by using GLP-1 drugs which only need to be taken once per week, with the possibility of taking medication orally in the form of pills.

GLP-1: The Goose that lays the golden eggs

GLP-1 drugs are synthetic versions of the hormone glucagon-like peptide 1 (GLP-1) which is naturally produced in the gut. Glucagon is a hormone which helps raise sugar levels in the body. When we take a GLP-1 drug, it signals to the body to produce more insulin and less glucagon.

By increasing insulin production and decreasing glucagon production, GLP-1 drugs can help to lower blood sugar levels and improve blood sugar control. This is why GLP-1 drugs are used to treat type 2 diabetes.

GLP-1 drugs can also help with weight loss. GLP-1 drugs make us feel fuller and less hungry, leading us to eat less and, consequently, lose weight. Hence, its applications to obesity care.

Novo Nordisk portfolio overview

Novo Nordisk, through its insulin portfolio, is very well positioned for this shift on diabetes care. Novo Nordisk products target 65% of the market value while they only correspond to 24.5% of the prescriptions as shown on the figure below.

Novo Nordisk has a market share of 54.9% in the growing GLP-1 market, with monopoly on the obesity market, 92% market share on a 41.6 DKK billion (5.9 USD billion approx) market in May 2023 which doubled its size from previous year. Moreover, Novo Nordisk is the only player on the diabetes market who has an approved GLP-1 tablet for diabetes oral treatment (Rybelsus®).

This unique positioning made Novo Nordisk diabetes sales increase 14% at constant exchange rate (CER) in 2022 driven by GLP-1 drugs growth. According to Novo Nordisk’s 2022 annual report, GLP-1 products increased 42% at CER while the total GLP-1 diabetes market increased 33.5% at CER.

On the other hand, insulin sales decreased 11% at CER as a consequence of the better options available to control diabetes for patients and price competitiveness.

It is important to understand the illness and medication options before introducing the company. In this newsletter I hope I have provided a clear overview on the secular trend of diabetes and obesity Novo Nordisk business is running on and how its portfolio is positioned to capture that value.

Next newsletter will be focused on Novo Nordisk business breakdown. Until then… Stay tuned at @SiemprePulpo