NGP spoke with Novo Nordisk’s CEO Lars Rebien Sørensen about his company’s approach to combat diabetes.
Novo Nordisk’s history is built on diabetes care. The discovery of insulin in 1921 led to the company’s formation in 1923. Ever since, Novo Nordisk has been part of the commercialisation of insulin, which was the first recombinant human protein to be manufactured in mammalian cells and in yeast cells, rendering it available for humanity in unlimited quantities.
Today, human insulins are being replaced by modern insulins, which are designed to improve their efficacy. Novo Nordisk has been at the forefront of delivering the innovations which enabled such a development. The company boasts the broadest diabetes product portfolio in the industry, including the most advanced products within the area of insulin delivery systems.
Novo Nordisk increased its first half-year operating profit by 14 percent in local currencies and – due to a significant negative currency development – by nine percent in Danish Krone. Altogether, the company reported a turnover of €2.7 billion Euro during the first six months, compared with €2.5 billion the year before. This raises the expectation for 2007 operating profit growth to around 10 percent.
Novo Nordisk’s main competitors, says CEO Lars Rebien Sørensen, are sanofi aventis and Eli Lilly. “Between us we share approximately 90 percent of the world’s insulin market. In addition to that, there are other companies that are involved in the treatment with oral medication to Type II diabetes. These are some of the major pharmaceutical companies such as Pfizer, GlaxoSmithKline, and also Takeda from Japan.”
Although best known for its diabetes treatments, Novo Nordisk’s blood-clotting drug NovoSeven accounted for nearly €733 million in sales last year, or 15 percent of corporate revenue. Compared to 2005, it enjoyed 11 percent sales growth. But just like many other pharmaceutical companies, Novo Nordisk has experienced setbacks with its blockbuster drug. The coagulant NovoSeven, which was approved for use against hemophilia, failed a phase 3 label-expanding study and cannot be used to treat bleeding in the brain.
The stock dropped 5.4 percent at first, but has rebounded with no implications for the broader strategies of the company. NovoSeven is still in testing as a treatment for a host of indications with bleeding-related problems, like heart surgery and acute trauma. Phase 2 and 3 trials are ongoing in many of these indications, and results from the phase 2 trial in heart surgery are expected later this year. “The setback mainly effects the people who suffer from intracerebral haemorrhage. We were offering the hope that for the first time ever, there was going to be a treatment to save the lives and improve the quality of the lives of some of these individuals, which are counted in the hundreds of thousands every year across the globe,” Sørensen says.
Taking the risk
Setbacks have affected pharmaceutical companies in many ways. The important thing, Sørensen emphasises, is to take the risk and get on with it. “Clinical trials are a calculated risk that society and pharmaceutical companies have to take with individuals entering into research programs. Individual cases where drugs have been withdrawn from the market have caused concern on behalf of the regulators and on behalf of the health professionals, but this is something we are working on within the industry.”
Without taking risks, believes Sørensen, the boundaries of knowledge will not be moved further. “We are taking a calculated risk by increasing our investment in R&D because we are investing largely into areas where we have a long-standing tradition, understanding these areas more than that of our competitors and more than other areas that we might choose to go into. We are currently in a very positive business cycle. The value creation that we are seeing right now is being invested back into the business, in global expansion and in R&D. In 2005 we invested 15 percent of sales in R&D, in 2006 it was 16 percent. This year it will be 17 percent, and next year it will be 18 percent.”
The 52-year-old CEO is convinced that the long-term value creation for research-based pharmaceutical companies is innovation. “Unless we come up with new therapies that are clinically differentiable from the current existing therapies, we won’t be able to continue to invest in R&D. But that is not to say that there is not a role to play for generic companies that are offering cheaper versions of previously patented products. That is the nature of the whole intellectual rights system that we have.”
While patent protection rewards pharmaceutical companies for their inventions, the privilege cannot last forever. It’s not a problem for Sørensen: “We have to come up with new inventions to continue to be at the forefront. Society will benefit from these innovations, from us working on them, and being able to copy them after a certain period of time. So there is a role to be played both for generic companies that can mass-commercialize previously patented products and for innovation-based companies that are good at continuing to develop new therapies.”
Sørensen doesn’t fear patent loss as much as many other companies do. This is because biopharmaceuticals are different from synthetic drugs in that small molecules can be copied more easily. “Within three months from patent expiration,” Sørensen explains, “these products have deteriorated in value by 90 percent because of the generic copies. This is not the lifecycle that we see in biopharmaceuticals. They are more complicated to manufacture and hence more testing, even clinical testing, is required to ensure that these products are similar to that of the original biopharmaceuticals. And so they tend to have a longer lifecycle and therefore, over long periods of time, are more valuable than small molecules.”
Apart from developing drugs, the Danish pharmaceutical company also has taken the initiative to call for a worldwide change in diabetes care. This is part of Sørensen’s ambition to change the public’s perception of the pharmaceutical industry. He would like his company to be regarded as a partner rather than as part of the problem in trying to improve public health. “Unfortunately,” Sørensen says, “the image of the pharmaceutical industry is negative. That’s something for which we have to blame ourselves. We have not been able to position the industry in the public’s mind as being part of the solution. We are being portrayed as self-serving, profiteering and arrogant. It is a complicated industry, and a controversial industry. We are making money on people’s ill-fortune, we are using technologies which the public in general doesn’t understand, we are using animals for testing, etc. We can do a lot to improve the image but overall the industry has a poor reputation that it actually doesn’t deserve.”
At last March’s Novo Nordisk Global Changing Diabetes Leadership Forum in New York, a variety of stakeholders – including industry, government officials, media, patient organizations and people suffering from diabetes – gathered to discuss how best to prevent the chronic disease. “It’s little recognized how debilitating and costly at the individual level as well as the societal level chronic diseases are for our society, not only in the developed world but also in developing countries. Chronic diseases account for 50 percent of mortality, with diabetes causing more annual death in developing countries than HIV/Aids.”
Joining forces with the government and other institutions, Sørensen believes, is essential in terms of raising awareness and preventing chronic diseases. “No one on their own can combat the epidemic of obesity and thereby the risk of developing diabetes. We all need to contribute. We should all be aware that we have different interests, and we should fully disclose the fact that we are also in the business to make money. But we can find areas where we can contribute in ways that serve our stakeholders as well as the broader public.”
Pharmaceutical companies profit from illness. Generally, they are more interested in raising awareness of their products to treat diseases than of the prevention of those diseases. Without diabetes, there would be no Novo Nordisk. “That would be wonderful,” concedes Sørensen, “in the sense that we align our interest entirely to that of our customers, the patients. They would prefer not to have the disease, or being cured of the disease. If that is possible, that is what we should seek. Today, 250 million people worldwide have diabetes, and that will grow to 400 million people in the next 20 years. Diabetes is going to be the biggest threat to public health that we have ever seen. Getting rid of diabetes would be a tremendous success, even if we are putting ourselves out of business. We’ll find something else to do in the meantime.”
A dramatic increase in the prevalence of diabetes is exacting a heavy economic burden on both developed and developing countries. Novo Nordisk sponsored a report from the Economist Intelligence Unit, who studied five countries: China, Denmark, India, the UK and the US. It was found that India is currently bearing the heaviest costs, with a cost equivalent of 2.1 percent of GDP being incurred as a result of the condition in 2007. Among the developed countries that were studied, the US faces the biggest burden, with a cost equivalent to 1.3 percent of GDP. The UK faces costs in the region of 0.4 percent of GDP, while Denmark incurs costs equivalent to 0.6 percent of GDP. Lost productivity costs alone are 0.6 percent of GDP for China. To put these figures into context, in 2006 the UK spent approximately 0.35 percent of GDP on foreign economic aid, and 0.76 percent of GDP on public tertiary education.
Sørensen sums up the report findings: “The diabetes epidemic is sweeping across the world and we need to address the huge social and economic impact that this devastating chronic disease is having in developed and developing countries. This report highlights the need for greater measurement and transparency to more accurately calculate the real economic burden of diabetes healthcare in terms of direct and indirect costs. It is vital that policy-makers, healthcare providers and industry work together to develop more effective health education, diseases awareness programmes and policies. By better prevention, detection and effective management of diabetes we could avoid many of the complications associated with the disease which account for much of the economic burden.”
Novo Nordisk takes its social responsibility seriously, and so do most pharmaceutical companies. Sørensen is convinced that no one can be in the business of public health without having a social obligation, and believes the extent to which his organisation has been shaped by its association with chronic disease, and diabetes in particular, is unique. “Our philosophy and our interaction with our customers is formed by the fact that we have dealt with the diabetic community for as long as we have. We will be dependant on having an open and honest relationship with our constituents, the people around the world with diabetes, for a very long time into the future. You don’t get that and you don’t retain that without a social commitment, without openness and honesty.”
Insulin products contributed more than two-thirds of Novo Nordisk’s revenue. And this won’t change in the future. “If I were to give a 10-year projection for Novo Nordisk, insulins plus a new class of drugs called GLP-1s, which is an injectable therapy for people with diabetes, will still account for two-thirds of our revenues because of the epidemic proportions of the diabetes disease globally, and the increased awareness, increased treatment and diagnosis. NovoSeven will hopefully grow as well, and it will grow in applications within the area of haemophilia. Hopefully, we will be successful in demonstrating that it can grow in the areas outside haemophilia, too; in trauma, in critical surgeries, in areas where people are exposed to life-threatening bleeds.”
Lars Rebien Sørensen has been with Novo Nordisk for 25 years. He joined the company’s Enzymes Marketing in 1982 and was appointed president and CEO in November 2000. Sørensen has an MSc in Forestry from The Royal Veterinary and Agricultural University in Denmark, and a BSc in International Economics from the Copenhagen Business School, Denmark.
Lars Rebien Sørensen visits a diabetes clinic in Tanzania in 2005.
Getting rid of diabetes would be a tremendous success, even if we are putting ourselves out of business. We’ll find something else to do in the meantime. Today, 250 million people worldwide have diabetes, and that will grow to 400 million people in the next 20 years.