Expat in Denmark | Success of Ozempic maker Novo Nordisk makes Danes nervous

Frank Jacobs

November 8, 2023
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It seems as if Denmark has discovered gold or oil, the country benefits so richly from the success of Novo Nordisk. But that success also has a downside and an expiration date. Will Denmark avoid the Nokia trap?

31 times, that’s how many times Jakob Ellemann-Jensen, the Danish Economy Minister, mentioned Novo Nordisk in a recent speech on the country’s growth prospects. It says something about the increasingly long shadow that the pharmaceutical giant is casting over its home country.

And that’s just the smallest of the impressive numbers the company generates. The largest is 422 billion euros: the current stock market value of ‘Novo’, as the Danes affectionately call their economic crown jewel.

Two numbers indicate how hallucinatingly large the company is. DSV, Denmark’s second largest company, is worth ‘only’ 30 billion euros. And Novo Nordisk is worth more than the entire gross domestic product (GDP) of Denmark. That amounts to just under 400 billion euros this year, predicts the International Monetary Fund (IMF).

Thanks to the almost insatiable demand for the medicines Ozempic and Wegovy, Novo Nordisk’s growth spurt seems to have no end yet. In 2022, the company made 7.4 billion euros in profit worldwide. In the first half of this year alone that was 5.2 billion euros.

The person who particularly benefits from this is the Danish tax authorities. Novo Nordisk maintains Denmark as its home base. It proclaims both the letter and the spirit of the tax law, a typical Danish stubbornness.

This means that Novo Nordisk single-handedly pays about 5 percent of all business taxes in Denmark. That amounts to 1.3 billion euros, a quarter of the annual budget for primary education.

Another plus is the lower interest rate. The success of Novo Nordisk pushes the Danish krone up, but because it is linked to the euro, the Danish Central Bank is forced to keep the interest rate about 0.4 percentage points lower than in the euro zone. The renewed rising wages and house prices are also attributed to the success of Novo Nordisk.

“It’s as if we’ve all found gold or oil,” says economist Lars Christensen. ‘Suddenly we create much more value with the same amount of labor and capital.’

But there is always a but. In March, the Danish National Bank predicted 0.7 percent growth for 2023. Without Novo Nordisk, that would have been zero growth at best. “Then we would have taken measures, but now everyone seems satisfied,” says political scientist Peter Nedergaard.

In other words, the success of one company masks the stagnation of the rest of the country. Some therefore argue for two state accounts. One with and one without Novo Nordisk.

The reimbursement of Ozempic will cost the Danish regions some 147 million euros this year. Improper prescribing behavior jeopardizes supplies for genuine diabetics and threatens reimbursement.

But what if a successful competitor emerges? Or a harmful side effect? Nervous economists fear this overdependence on one successful sector. They’re talking about the Nokia fall.

That mobile phone pioneer generated a quarter of Finnish business taxes until Apple launched the iPhone in 2007. Nokia imploded. Only a decade later did Finland recover from that hangover.

Will that disaster scenario repeat itself here? There’s a good chance not, because the Danes know when the trees stop growing into the sky: in just under ten years. Then Novo Nordisk’s patent on semaglutide, the active substance in both Ozempic and Wegovy, will expire.

Frank Jacobs is an independent writer and lives in Denmark.