Novo Nordisk’s investments in expanding production capacity to serve millions of patients worldwide struggling with weight management issues are paying off. Last year, the company committed to investing DKK 75 billion in expanding production sites across the globe as it looks to operate the facilities 24 hours a day, seven days a week. The facilities are to produce life-changing medicines from which the company generates a good chunk of its earnings.
Robust Sales Growth
The investments helped propel the company to better-than-expected 2023 earnings driven by robust sales for the widely popular anti-obesity and diabetes drugs. The company’s full-year sales increased 31% to DKK 232.3 billion or $33.71 billion, translating to a 36% increase at constant exchange rates. The robust sales growth propelled the company to an operating profit increase of 37% and 44% at a constant exchange rate of 102.6 billion Kroner.
The solid performance of the diabetes and obesity care division drove the impressive performance. The obesity care division was at the forefront, recording sales growth of 154% at a constant exchange rate of 41.6 billion kroner.
The maker of weight loss drug Wegovy and diabetes drug Ozempic expects sales growth to continue in 2023. That’s because the level of demand for obesity drugs remains extremely high even though the company is only serving a couple of millions of patients. The fact that more than 40 million people are living with diabetes presents a massive market that the company hopes to target. Consequently, it is projecting sales growth between 18% and 26% in constant exchange rate terms.
Nevertheless, Novo Nordisk will have to contend with stiff and growing competition in the weight loss management sector. US Stalwart Eli Lilly presents the biggest test for the Danish company, presenting a competition that could result in downward price pressures in the US. According to the company’s CEO, Lars Fruergaard Jørgensen, they are used to competing to have the best products and, therefore, not expected to come under pressure.
While drug prices are expected to come down amid stiff competition in the industry, Novo Nordisk does not expect to see a slowdown in global demand. The strong demand should ensure the company moves as many products as possible to counter any adverse effects of stiff competition that results in price pressure.
Growing Demand
Novo Nordisk insists that the unmet needs in type 2 diabetes and obesity continue to grow by the day. Likewise, the ever-growing prevalence of obesity around the globe should continue to ensure a surge in demand for the company’s GLP 1-based therapies. The strong demand is already causing increased pressure in the supply chain, leading to periodic delivery delays.
In anticipation of a further spike in demand, Novo Nordisk is investing heavily in enhancing its production capacity. By ensuring production chains run 24 hours a day, seven days a week, the company should be able to produce more life-changing products to meet the ever-growing obesity risk. In the US, the company has started to increase the supply of its lower dosage Wegovy for weight loss.
