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4 Career Lessons from Novo Nordisk's Rise

4 Career Lessons from Novo Nordisk's Rise

From saving one life to a pharma revolution. And what it can teach us

Giammarco Pacifico
January 31, 2024

You’ve probably heard about semaglutide, the drug developed and commercialized by Novo Nordisk for diabetes (Ozempic) and weight management (Wegovy).

Why was it all over the news?

For the first time in history, this drug tackles two of the largest diseases in the world and its success has turned Novo Nordisk, a company owned by a charitable foundation into the largest European company.

After listening to the Acquired episode on Novo Nordisk (almost 4 hours long), I decided to do a deep dive into this story and share it with you.

Why should you care?

Following a quick summary that will give you a taste of such an incredible story while sparing you countless hours of research, I’ll share 4 lessons I learned from it and a few open questions so you can apply them to your own career.

The Story of Novo Nordisk and Semaglutide (in 5 minutes)

The roots of Novo Nordisk trace back to 1921 in Toronto, Canada, with the extraction of insulin from dogs livers, a groundbreaking discovery that earned John Macleod and Frederick Banting a Nobel Prize. Diabetes, particularly type I, was a significant challenge with limited treatment options, primarily the "starvation diet."

The University of Toronto decided to license the development rights to Eli Lily in the US, which started buying cows and pig pancreases from farmers to extract large doses of insulin (8k pounds of the pancreas to make 1 pound of insulin).

Novo Nordisk's inception was driven by August Krogh, a Nobel laureate from Denmark, whose wife's diabetes diagnosis in 1920 led to him meeting with Macleod in Toronto and founding Nordisk together with Hans Christian Hagedorn (his wife’s physician), the Lion's Chemical Factory (owned by August Kongsted) and the Pedersen brothers. After a turbulent start between Hagedorn and the Pedersen brothers, the latter group decided to leave Nordisk and leverage their engineering and manufacturing skills to launch a competitor company focused on insulin production, called Novo. This leads to a decades-long rivalry.

Since the very beginning, both of these operational companies have each been managed by their respective foundations with the mission to reinvest all profits into diabetes research.

This model of a foundation owning the operational company is true to this day.

During World War II, the Nazis invade Denmark in 1940 with no military resistance. Since Nordisk had only focused on national manufacturing and import/export across Europe, they stopped getting paid because international payments were blocked. Instead, Novo had expanded its manufacturing plants internationally and they became the official producer and distributor of insulin across Europe (with the approval of the Nazis to prevent diabetic patients from dying).

This sets up Novo for success and leads to massive growth over the war years to the detriment of Nordisk.

In the 1970s, Nordisk rejected an acquisition proposal from Novo, choosing to double down on the US market, which lacked a category leader. This turned out to be the right decision and Nordisk grew at 30% CAGR throughout the 1970s.

By 1980, Nordisk was 1/10 of Novo, moving from a pure licensing company to a manufacturing company with a global footprint.

In 1974 Novo went public in the Copenhagen stock exchange thanks to their insulin business of $100M/year whereas Nordisk sales were only $30M/year.

In the meantime, Genentech emerges in the US with their recombinant DNA technology and their 1st application: insulin. After partnering with Eli Lily for manufacturing and distribution, Genentech went public in 1980, marking a huge moment for the US biotech industry fueled by Silicon Valley Venture Capital.

In 1984, Nordisk also went public in Copenhagen but because of increasing market pressure from Eli Lily, they only had 20% of the market share. Novo had 30%.

Driven by the desire to fight the Eli Lily/Genentech partnership, Novo and Nordisk decided to merge in 1989. It’s a double merger (both operating companies and foundations) with a split of 62% Novo and 38% Nordisk.

This marks the beginning of Novo Nordisk. After the merger, the company took off with a 20% annual growth for the next 15 years.

In 2004, despite a tempting offer from Swiss Serono, Novo Nordisk chose not to sell, showcasing the company's commitment to its mission. This decision set the stage for the development of semaglutide.

The story of semaglutide, a GLP-1 receptor antagonist, began with Lotte Bjerre Knudsen's dedication.

At that time, Metformin was the main drug for Type II diabetic patients as a first line of defence before going to insulin injections but Novo Nordisk did not have any drug in the oral diabetic market.

Lotte’s idea was that if you could get more GLP-1 in patients you could stabilize their insulin production and manage the disease. This turned out to be true but GLP-1 was only active for 5 minutes before getting degraded and absorbed. After every other player gave up, she ended up synthetizing liraglutide with a 26-hour active life.

Clinical trials commenced in 1997 with Phase III trials starting only in 2007, eventually leading to the approval of Victoza in 2010 (only for diabetes).

Confirming some initial results in mice and then in small human trials, Lotte pushes for investing into the same GLP-1 principle but this time weight management.

In 2013, Novo Nordisk submitted Saxenda for weight loss with a higher recommended dose of GLP-1.

Victoza is a huge hit with $1B in sales during its first year in the market but Saxenda is not as huge as expected as the weight loss is below the industry standard of 10% of long-term weight reduction.

The world started to lose interest in using GLP-1 for weight loss but in 2016 Novo Nordisk began new clinical trials with their new improved GLP-1 (semaglutide).

The diabetic formulation (Ozempic) only needs to be injected once per week, compared to 1/day for liraglutide and it was approved in 2019, whereas its weight loss counterpart (Wagovy) is twice as effective for weight loss, with a 15%+ decrease in BMI and entered the market in 2021.

Novo Nordisk is now a GLP-1 company with 68% of its revenue coming from semaglutide/liraglutide, 84% gross profit margin and a valuation of $370B+.

Its current market value is larger than Denmark's GDP!

Lesson #1: startup mentality

When Eli Lily received the exclusive license from the University of Toronto to extract insulin from animals’ pancreas, they convinced farmers to sell them cows’ pancreas, even if this meant a bigger overhead for them (they did not separate individual organs from carcases).

Large companies today were once scrappy startups, not just in software but also in life sciences.

Can you imagine what it must have been to work for Eli Lily at that time?
Or even for Nordisk when Crowe and Agadorn turned a chemical factory into an insulin manufacturing line?

Lesson #2: being in the right circle

Nothing would have happened if August Krogh had not met John Macleod as the news of the discovery of insulin had not reached Danemark.

The reason why these two people met is because they were both Nobel laureates which at that time was the only way to travel the world and give speeches to other prestigious universities.

Being part of the right group of people is a timeless way to know in which direction you should go, even if you only want to save your wife’s life.

What’s the best circle you could be a part of?

Lesson #3: management incentives

As Charlie Munger famously said “Show me the incentive, I'll show you the outcome”: setting up the right incentive schemes is how you align people over the long term.

Novo Nordisk's story is a masterpiece of different incentives that can win in a capitalist economy. The Foundation not accepting an early sale to Serono because it was mostly a financial decision, instead of being aligned with its mission sets an example for all future company executives. To this day, executives and board members don’t get shares as compensation but are forced to personally buy and hold shares to be invested in the company’s success.

There are infinite ways to align incentives and drive behaviour but what’s certain is that it cannot be avoided at every level of the organization.

What would you expect the incentives to be in your company so that you and your team can do the best work?

Lesson #4: expertise is sticky

While Novo Nordisk entered clinical trials for liraglutide in 1997, a team in the US led by Daniel Drucker found out that a lizard venom had plenty of the GLP-1 hormone which didn’t degrade after 5 minutes. This led to the approval of Bieta, the world's first GLP-1 drug in 2005 by Eli Lily.

What’s surprising about this is that Daniel Drucker was a researcher at the University of Toronto, the same place where insulin was first extracted 90 years before.

Deep expertise leaves traces that grow within an ecosystem for decades to come, even if it seems too late and far beyond any individual. Being where the action is (or was) is the easiest way to access the intrinsic knowledge of a community as very often there is still fertile ground for innovation.

What’s the community or ecosystem that you wish you were part of?
Why are not working your way there yet?

If you enjoyed this issue, share it with someone who loved a great success story.

This week's top scientific reads

Bridge RNAs to Revolutionize Precision Medicine (BioRxiv)
Gene Therapy Restores Hearing in 11-year-old Boy (Time)
Revolutionizing Drug Design with Lingo3DMol (Nature Machine Intelligence)
Enhancing Oxygen Transfer in Blood with Ultrasounds (MDPI)
CAR T Cells Show Promise in Slowing Aging (Nature Aging)

Read my comments on these articles here.

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