Nordic giant gains from obesity epidemic
Have cheats with smartphones killed off the pub quiz? I hope not because I have a really good question that would have the entire pub groaning in disbelief when the MC comes up with the answer.
What's the biggest company in the Nordic region? All the obvious answers are wrong. It is not Eriksson or Statoil or Volvo or even Danske Bank. It's the Danish drugmaker Novo Nordisk (Novo), which is valued at a fifth more than Statoil.
It is a 90-year old pharma company, whose main business is producing treatments for diabetes, haemophilia and growth deficiencies. Created in 1989 through a merger of two Danish companies which had been in business since the 1920s, Novo operates in 75 countries and employs 38,000 people. It markets its product in 180 countries worldwide and is valued at Danish Kroner (DKK) 665bn (€90bn).
Like a lot of pharma giants, Novo was originally the inspiration of brilliant academics. In this case it was the Nobel Prize-winning professor at the University of Copenhagen, August Krogh, and his wife. The couple received permission to produce and sell insulin in the Nordic markets from the University of Toronto, where the first insulin was produced in 1921.
Professor Krogh formed a company called Nordisk Insulin Laboratorum in 1923. A year later two employees, the Pederson brothers, left Nordisk to form Novo Terapeutik.
They successfully produced liquid insulin and a special syringe. They approached Nordisk to market their products and were refused. So began 65 years of intense competition. In 1974, Novo's shares were quoted on the Copenhagen Stock Exchange and in 1981 they were quoted on the New York Stock Exchange, the first Scandinavian company to achieve that distinction. In 1989, Nordisk Insulin and Novo were merged to become Novo Nordisk and establish the group as the world leader in its field.
It controls half the global market for insulin and a sizable 27pc (57pc in Japan) of the world's diabetic treatment market. This condition is growing at an alarming rate due to the global obesity epidemic. Today 380 million people have the disease and in two decades it's estimated that number could be as high as 600 million. The company's sales of diabetic products last year were 80pc of group sales. Novo also has nearly a third of the global market for growth disorders and a significant share in the haemophilia market.
In these circumstances Novo has become a flyer on the stock markets. It has had double-digit growth in each of the past 10 years. Sales last year were DKK 85bn (€11.4bn), up 12pc on the previous year and two-thirds ahead of sales five years ago.
Profits from operations have more than doubled over a similar period. The company is divided into five regions of which the US accounts for almost half of group sales and Europe has a quarter.
It remains upbeat, predicting growth in most of its markets including China which is expecting annual double-digit growth.
It is also planning to increase its market share in the US by adding 400 new medical representatives to its existing sales force.
Holders of Nova Nordisk shares since 2009 must be very pleased – their value has increased sixfold. Today, these shares are worth DKK 242 (€33), marginally down on a recent high, while the company's price-to-earnings ratio is a pricey 24.
NOTHING PUBLISHED IN THIS SECTION SHOULD BE TAKEN AS A RECOMMENDATION, EITHER IMPLICIT OR EXPLICIT, TO BUY OR SELL ANY OF THE SHARES MENTIONED