By Elsa Ohlen

In the sleepy suburb of Bagsværd, a 25-minute train ride from Denmark's capital of Copenhagen, weight-loss drugmaker Novo Nordisk is everywhere. Street after street is filled with the company's offices, parking lots for Novo employees, and construction sites for the pharma giant's future expansion. It is virtually a Novo-town.

Almost everyone in Denmark has a link to the maker of blockbuster weight-loss drug Ozempic. Rohan Parshad is a 21-year-old student at Copenhagen Business School who holds Novo stock. Henrik, Rohan's father, worked as a scientist at Novo Nordisk for 13 years and opened up a savings account for his son when he was born; 60% is Novo stock. Rohan's grandfather Ram has also benefited from Novo's medications for the past two decades as a Type 2 diabetic.

"This company is going to do great things in the future," Rohan Parshad tells Barron's. "We are just so proud of a company in Denmark thriving and being one of the biggest in the world."

But Denmark's new identity is under attack on multiple fronts, from science to geopolitics.

Shares of Novo have sunk 58% from their June 2024 peak, amid tariff troubles, fierce competition from U.S. rival Eli Lilly, and an overall pullback in excitement around weight-loss drugs.

This past week, Goldman Sachs lowered its total addressable market for obesity drugs by 2030 to $95 billion from $130 billion. The numbers are still huge, but a 30%-plus market reduction makes investors nervous.

Novo has already lost its crown as Europe's most valuable company, falling behind SAP, the German software maker, last month. More recently, it has also slipped behind luxury-goods maker LVMH Moët Hennessy Louis Vuitton.

Meanwhile, Novo's pioneering work in so-called GLP-1 weight-loss drugs has now been surpassed by Eli Lilly. Clinical trials on Lilly's latest drugs have led to greater weight loss than Novo's new treatments.

President Donald Trump's tariff policy is also causing uncertainty for Novo and its home country. An unwinding of global trade will hit the company and country hard; Novo has 16 production sites across the world, including in Brazil, China, Denmark, France, and the U.S. For Denmark, the uncertainty goes beyond trade, with Trump making waves about taking control of Greenland, a Danish territory.

Denmark is a small country reliant on exports, which have soared alongside booming Novo sales. Without Novo Nordisk, Denmark would probably find itself in or close to a recession, like other parts of Europe. Its influence on the Danish economy goes beyond multibillion-dollar investments in new factories, its 30,000 local employees, and how much it adds to growth. It also affects the government's spending budget, interest rates, housing prices, and mortgages.

Denmark's Discovery

Pharma has been a key driver for Denmark's growth for 20 years, but Novo took it to another level with semaglutide, the key ingredient in Ozempic. It's a type of gut hormone called glucagon-like peptide-1, or GLP-1.

Ozempic became a pioneering treatment for diabetes, and Novo's business exploded as researchers realized its potential for weight loss.

At one point, the company's success -- and investors' optimism -- pushed the company's market value past Denmark's annual gross domestic product.

Denmark's thriving economy contrasts starkly with its neighbors, which are suffering sluggish growth or even stagnation. "If we took Novo out of the story in the past five years, the Danish economy would have been in a similar lackluster situation as the Swedish or the German economy," economist Lars Christensen tells Barron's. "Novo is making that difference."

Around half of Denmark's GDP growth can be traced back to the success of the pharmaceutical sector, which is overwhelmingly made up of Novo Nordisk, according to economists at Danske Bank, Denmark's largest financial firm. There's also growth excluding pharma, due to a knock-on effect from pharmaceuticals to other areas, the economists say.

In late 2024, the Ministry of Economic Affairs cited the rapid expansion of Novo Nordisk as it raised the country's growth outlook to 3% for 2024, from an earlier estimate of 1.9%, and to 2.9% in 2025, from 2.2%. That is largely due to soaring exports, which have doubled since prior to Covid-19. They now account for 70% of Denmark's GDP.

The growth spurt in exports gave Denmark a record trade surplus of over 384 billion kroner, or about $58 billion, in 2024.

That has contributed to a strengthening of the Danish krone. The currency is pegged against the euro, and the Danish central bank has held down interest rates to prevent it from appreciating. Denmark's target interest rate is 2.1%, currently the lowest in the European Union.

Lower interest rates have benefited businesses, the public sector, and homeowners. In other words, Novo's success even helps Danes who have never worked for the company or owned its stock, boosting home prices while keeping mortgage rates low.

Novo is also Denmark's largest taxpayer. It paid about DKK26 billion in tax in 2024, almost double what it paid two years earlier. It also drove a fifth of employment growth in Denmark last year as it ramped up multibillion-dollar investments in manufacturing sites amid a global shortage of its products.

"I don't think that has sunk in just how important Novo is [for Denmark], " says Danske Bank Chief Economist Las Olsen.

A Wake-Up Call

But Novo's massive influence on the Danish economy means that shocks to the business have a national impact. That became painfully clear on Dec. 20, when the stock fell 18%. Novo's selloff dragged down the entire Denmark stock market. The Copenhagen blue-chip index fell 13% on the day.

The selloff came on disappointing clinical results for Novo's experimental weight-loss drug CagriSema. Novo had expected a trial to show at least 25% weight loss for patients. Instead, the data showed that patients lost 22.7% of their body weight over 18 months. That loss only matched Eli Lilly's existing weight-loss drug Zepbound.

"What am I going to do? This is all my money," friends of Nikolaj Byg Jørgensen, 38, told him that day in late December. Like many people in Denmark, they had invested a lot in Novo. Now they were forced to face a future where they might not be able to afford to buy their first apartment, or face a leaner pension.

Jørgensen, a fairly seasoned retail investor who works at a residence for autistic adults, put on a brave face for his friends but didn't want to check the state of his own investments . It was depressing, he says. But shares will go up again -- Jørgensen is convinced of that. "Wait it out; it's going to go up again," he told both his friends and himself.

Novo Nordisk began as two Danish companies in the 1920s: Nordisk Insulinlaboratorium and Novo Terapeutisk Laboratorium. The business stems from Danish Nobel laureate August Krogh and his wife, Marie, a doctor living with diabetes, using insulin to treat patients in 1923 -- a tale that most Danes know well. In 1982, Novo became the first company to market a product identical to human insulin; the hormone had previously been extracted from animals.

Nordics have witnessed the risk of national pride -- and an entire economy -- being tied up in one company.

A generation ago, Nokia, the Finnish telecom company, was the world's largest smartphone maker. In 2007, Nokia's sales were about $70 billion. That year, Apple launched its first iPhone, and Nokia's 50% smartphone market share fell to 4% in four years, with sales plunging to $17 billion by 2013. Today, Nokia is no longer in the smartphone business.

Nokia's downfall made it that much harder for Finland to cope with the financial crisis. Its GDP contracted by 8.1% in 2009, roughly double Europe's decline. Its growth trailed Europe's for years after that.

Denmark Prime Minister Mette Frederiksen and Novo Nordisk Foundation CEO Mads Krogsgaard Thomsen have both downplayed the so-called Nokia risk. The small Nordic countries are both export-driven economies, but there are significant differences as well, especially around labor.

Danske Bank's Olsen says that Finland's economy didn't adapt quickly enough to Nokia's downfall. Weak labor conditions were driven by centralized wages and high rates of long-term unemployment, he says, while Nokia's success had pushed up wages, making other industries uncompetitive. "It was very difficult for the remaining Finnish companies to compete and pick up the slack from Nokia," he says.

Danish regulations provide more flexibility around labor, Olsen says.

Market Leaders

Given the soaring number of people worldwide affected by obesity and diabetes, the market for weight-loss drugs will continue to grow over time. Kurt Jacobsen, a historian and author of a book on Novo, likens the phenomenon to the universe: It keeps expanding. Novo, though, is in a battle with Eli Lilly for market share.

In the U.S., Novo and Lilly have the only GLP-1 drugs approved for weight loss, Wegovy and Zepbound, respectively. They stem from the companies' diabetes treatments, Ozempic and Mounjaro.

Lilly's rival drugs have already been shown to result in more pronounced weight loss than Novo's approved treatments.

Though Ozempic, approved in the U.S. in 2017 for treating Type 2 diabetes, had a four-year head start on Mounjaro, Lilly's weight-loss sales have almost caught up with Novo's. In 2024, Novo's Ozempic/Wegovy sales were $25.2 billion (about DKK178.5 billion), while Lilly's Mounjaro/Zepbound revenue was $16.5 billion.

The next big thing will be obesity pills, analysts say. Here, Lilly has an edge -- and that's unsettling Novo's backers. If Novo builds its future oral drug the same way as its injectables, which seems likely, that could cause supply issues because it would need the same ingredients and require the same intensive manufacturing process, says Artisan Partners portfolio manager Chris Smith.

Meanwhile, Lilly's late-stage obesity pill candidate orforglipron is a so-called small-molecule drug, meaning that it's easier to manufacture and has a more scalable process than Novo's large molecule treatments. The pills could also have greater global scope, as they don't need to be shipped overnight in cold storage like injectable versions, adds Smith, who owns Lilly stock but not Novo, partly for this reason.

The good news for Novo is that scientists and researchers see no ceiling on the potential uses for GLP-1s. The medicine's labels have already expanded to include heart conditions, kidney disease, and sleep apnea. Clinical trials have suggested that the drugs could be used to treat Alzheimer's and substance abuse, as well.

In Bagsværd and Copenhagen, Danes remain optimistic and seem unbothered by the harsh economic climate that's weighing on the country's neighbors. The Danish cafe Social Brew, on the corner of Vesterport station in central Copenhagen, is bustling at lunchtime as people dig into the country's traditional cuisine smørrebrød. The diners appear full of hope that the months of declines are just a blip for Novo and Danish pride.

But with Novo stock filling Danish pension funds, there's no running from the company's prospects. No other country and stock can tout such a symbiotic relationship.

In its latest annual report, Novo is clear-eyed about the issues: "The current risk landscape is impacted by elevated geopolitical uncertainties and market dynamics in the segments in which we operate."

As Olsen, the economist, says, "What goes up can also go down, and pharma is a volatile business."

For Danes like Parshad and Jørgensen, it's a risk they're learning to live with. As Parshad says, "Nothing is really safe."

Write to Elsa Ohlen at elsa.ohlen@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 11, 2025 02:30 ET (06:30 GMT)

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