Novo Nordisk Strategic Position

1. Novo Nordisk
Strategic Position
Mohamed Boriek Shehata Abdelkader
user14235528
LJMU-7502-UNIMBA
"Exploring Strategy for Organisations“
23/10/2022
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2. Novo Nordisk introduction and company background
Diabetes is one of the major healthcare challenges with an estimated 537 million adult patients aged 20–79 years living with diabetes.
This represents 10.5% of the world’s population in this age group ,This number is predicted to rise to 643 million (11.3%) by 2030 and to
783 million (12.2%) by 2045.(IDF Diabetes Atlas 10th edition 2021)
As the leading supplier of Recombinant Insulin Novo Nordisk AS is one of the most important biopharmaceutical companies in the
world.(Novo Nordisk Pharmatech, 2022)
Novo Nordisk AS is a subsidiary of Novo Holdings AS that focuses on the discovery, development, and production of new biological
therapies was founded in 1923 and headquartered in Bagsvaerd, Denmark. (Novo Nordisk Pharmatech, 2022)
Novo Nordisk discovers, develops, and manufactures novel biological medicines and makes them accessible to patients worldwide.
The company’s strategy is to secure a leading position in biopharmaceuticals market by using its extensive portfolio; and strengthen its
presence in diabetes and obesity care market by offering innovative medicines to address the unmet medical needs. (Novo Nordisk
Pharmatech, 2022)
Novo Nordisk also intends to establish a strong presence in other serious chronic diseases such as cardiovascular disease, NASH, and
Alzheimer’s disease by building competitive pipeline and scientific leadership.
Carries out the research, development, manufacture and marketing of products in the areas of insulin (including premix insulin, long-
acting insulin, fast-acting insulin and human insulin); oral antidiabetic products (OAD); diabetes, GLP-1 and related delivery systems
(including diabetes pens and needles and growth hormone pens); obesity and other chronic diseases. (Novo Nordisk Pharmatech, 2022)
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3. Major brands include: Tresiba, NovoRapid/NovoLog, NovoMix/NovoLog Mix, Levemir, Victoza, Xultophy, Ozempic, Saxenda, NovoPen,
among others. With 34.6 million people using Novo Nordisk diabetes care products. (Novo Nordisk Pharmatech, 2022)
Novo Nordisk conducts R&D to engineer proteins into safe and effective therapies and develop new and improved delivery systems
The company is developing treatments for people living with diabetes, obesity, rare blood disorders, hemophilia, endocrine disorders,
growth disorders and other chronic diseases such as non-alcoholic steatohepatitis (NASH), Alzheimer’s disease, sickle cell disease, kidney
disease, Parkinson’s disease and cardiovascular diseases.
In FY2021, the company spent DKK17,772 million on its R&D which as a percentage of revenue stood at 12.5%. The company operates
five R&D sites in Denmark, the UK, the US, China and India. R&D core capabilities include engineering, formulating, developing and
delivering. (Kruse-Jacobsen, 2022)
The company has R&D collaborations with several biotech companies, including BioLamina, Kallyope, Emisphere, and Adimab and
universities, including Lunds University, University of California San Francisco to accelerate innovation from partnerships to patients and
attract top talents to its global R&D sites. (Kruse-Jacobsen, 2022)
Novo Nordisk Reported revenue of DKK121,597.0 million for FY2021, which grew 12.6% YoY, and recorded a CAGR of 8.7% during
2019-21. Diabetes and Obesity care accounted for 86.4% of the company's revenue in FY2021. (Kruse-Jacobsen, 2022)
Novo Nordisk introduction and company background
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4. Novo Nordisk mission is to drive change to defeat diabetes and other serious chronic diseases such as obesity, and rare blood and rare
endocrine diseases. (Novo Nordisk Pharmatech, 2022)
Novo Nordisk vision is “We are committed to providing sustainable pharmaceutical materials through innovative and customized
solutions” (Novo Nordisk Pharmatech, 2022)
Novo Nordisk values commitment to contribute significantly to research, education, treatment, innovation and humanitarian and social
purposes, quality is the underlying principle for all our activities and respect other people’s ideas and understand that producing landmark
results that benefit society takes time. (Novo Nordisk Pharmatech, 2022)
2025 Strategic Aspirations (Richardson, 2022)
Purpose and sustainability (ESG): Progress towards zero environmental impact ,Being respected for adding value to society
Ensure distinct core capabilities and evolve culture
Innovation and therapeutic focus: Further raise the innovation-bar for diabetes treatment ,Develop a leading portfolio of superior
treatment solutions for obesity ,Strengthen and progress the Rare disease pipeline ,Establish presence in Other serious chronic diseases
focusing on CVD, NASH and CKD
Commercial execution: Strengthen Diabetes leadership - aim at global value market share of more than 1/3 ,More than 25 billion DKK in
Obesity sales by 2025 ,Secure a sustained growth outlook for Rare disease
Financials: Deliver solid sales and operating profit growth, Deliver 6-10% sales growth in International Operations ,Transform 70% of
sales in the USA1 ,Drive operational efficiencies across the value chain to enable investments in future growth assets ,Deliver free cash
flow to enable attractive capital allocation to shareholders
Novo Nordisk Mission, Vision and Values and 2025 Strategic aspirations
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5. 5
• The Ukraine-Russia war & China-Taiwan conflict threatens supply chain stability, with shrinking production and disruptions to
daily operations and inventory.
• As a Scandinavian based company, the Russian invasion or attack is a threat after the European-Russian conflict following Ukraine
invasion.
• Negative impact on healthcare spending and pharma sales in Russia and Ukraine which can affect Novo sales and expansion.
Industry Analysis: (PESTELAnalysis)
Political
Economical
• Novo Plans to decrease CO2 emissions gradually to reach 0% by 2030 through shifting to renewable electric energy in production
facilities.
• Animal rights activists and organizations put pressure on pharma companies about using lab animals in early phases of R&D this
can negatively impact Novo R&D plans.
• Increased global awareness about plastic challenge ,creating recyclable products can positively impact Novo as most of Diabetes
delivery systems are made of plastic.
5
Social
• 537 million diabetic patients worldwide with 50% of them undiagnosed which gives Novo a space for expansion in Diabetes current
products and R&D.
• As the world's population tends to have higher BMIs and needs medication to manage the resulting issues, there is a significant
opportunity to recruit new patients.
• Increased awareness about metabolic diseases and obesity especially among millennials is rising and can help to increase the patients
pool for Novo products.
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6. • Inflation leads to Increased production costs are passed onto consumers, leading to reduced consumption.
• Interest rate increase can be a pressure on Novo in attraction of more investors
• The need to increase employee wages can place pressure on already tight profit margins.
• Shortages lead to insufficient staff to manage factories and production.
• Variations in the exchange rate and modifications to tax laws. A higher-than-anticipated tax level for the corporation could emerge from
significant tax adjustments and fines brought on by changes to tax law or the dismissal of important tax cases.
Industry Analysis: (PESTELAnalysis)
Technological
Environmental
• Reliable IT systems and infrastructure are essential for the company's capacity to operate efficiently across the global value chain,
where disruptions to IT systems, such as cyber attacks and data security breaches, may occur especially after the Russian –
European conflict.
• In the competitive and high dynamic market of Diabetes Research to improve production of current products and innovate new
patents , Novo must invest to keep it`s leadership position .
6
Legal
• Post marketing surveillance about side effects by regulatory authorities for Novo products may negatively impact the legal position of
the company.
• Strong regulation authorities (FDA ,EMA) protect the patency's of Novo innovative products.
• Regulatory requirements for new pharma products approval is different between global area`s and may take longer time in important
markets as China.
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7. Novo Nordisk SWOT Analysis
S W
Weakness
Focus on R&D
The company develops its R&D core skills Diabetes, obesity and
other areas, hemophilia, NASH, sickle disease, and growth disorders
, including deep disease understanding, formulating, engineering,
producing, and delivering protein-based therapeutics spending 11.5%
of revenue in FY 2021 on R&D .
Strong Operational Performance
Strong operational success boosts investor confidence and optimism.
In FY2021, Novo Nordisk's revenue rose 10.9% to DKK 140,800
million with profit growth of 13%. (CER).
Free Cash flow
DKK 29,319 million available cash flow that can be used for R&D
or strategic acquisitions.
Strong Patent Portfolio
Patent portfolio boosts financial performance and keep its products
original and prevent copycats, the corporation has a substantial
intellectual property portfolio with13 global patents on December 31,
2021.
Global Presence
Available in 80 countries with more than 48,000 employees
with RD centers in 5 countries.
Strength
Increase in Debt
Rising debt could affect the operational performance of the company
as a major portion of the earnings would be diverted towards servicing
its debt obligations.
Novo Nordisk’s total debt as of FY2021 was DKK26,645 million,
which increased 157.3% over the previous year.
Consequently, the company’s long-term debt increased by 347.4% to
DKK12,961 million in FY2021 from DKK2,897 million in FY2020.
If the company fails to comply with any of the debt service
requirements, the debt could become due and payable prior to its
scheduled maturity.
Shortage of main blockbuster Ozempic
Due to the wide use of Ozempic(Semaglutide) in weight loss away
from it`s main indication which is Type 2 Diabetes and the increase
demand for the product there have been a shortage in supply allover
the world from April 2022 and expected to continue to the beginning
of 2023, this shortage also affected the launch of the weight loss form
of Semaglutide under the name Wegovy.(EMA 2022)
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8. Novo Nordisk SWOT Analysis
Threats
Regulatory Approval for New Products
Launch of new products and regulatory approvals for the treatment
of Type II diabetes (T2D) and cardiovascular diseases will
complement Novo Nordisk’s product portfolio and provide
opportunities to expand its market reach. In FY2021, the company
received approval for Xulthophy and Ozempic in China for the
treatment of T2D.
Metabolic disorders prevalence
Increasing prevalence of Metabolic disorders including Obesity ,
Prediabetes ,Diabetes and Dyslipidemia which increase the patient
pool for Novo`s current products and future pipeline.
Strategic Acquisitions
The company continues to view acquisitions as a major part of its
growth strategy. In 2021, the company entered into 3 agreements to
acquire Dicerna Pharmaceuticals including its ribonucleic acid
interference (RNAi) platform for US$3.3billion ,Prothena’s
investigational drug, PRX004, as well as a wider ATTR amyloidosis
programme for US$1.2 billion. And Neotope Neuroscience Limited
from Prothena Biosciences Limited for US$1.23 billion.
Opportunities
Competition and Technological Change
Novo Nordisk competes in a fast-changing biopharmaceutical
business. Rapid advances could render the company’s products that
compete with new or approved drugs from competitors Despite their
differing approaches, several biopharmaceutical companies are
developing diabetes treatment medicines that potentially compete with
Novo Nordisk's. Eli Lilly new product Monjounro is an example of
such threat.
Product Liability Claims
Product liability claims against Novo Nordisk, or its consumers could
hurt revenue. The corporation will be fined and sued for product
liability. Novo Nordisk faces incretin-related product liability
litigation. As of February 2021, 384 individuals have sued Novo
Nordisk for pancreatic cancer caused by Victoza and other GLP-1.
Decrease in healthcare expenditure
Economic slowdown can negatively affect the public spending on
Healthcare which will affect Novo sales or product pricing in
government negotiations.
O T
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9. Buyer Power Threat of substitution Supplier power Threat of new entry Competitive rivalry
• Healthcare industry
buyers are constantly
looking for methods to
save money.
• This indicates that
consumers are under
pressure to make low-
priced purchases, which
increases their price
sensitivity.
• They want to spend as
little money as they can
while purchasing the best
products.
• Long-term profitability
for Novo Nordisk A/S can
be impacted by this.
• In the high dynamic
market of Diabetes
and with fierce
competition from
Eli- Lilly and Sanofi
the threat of
substitution with new
products offering
unique value than
Novo current
products is high,
therefore it is
important for Novo
Nordisk to focus on
R&D to keep up with
market new
developments.
• Novo Nordisk's
products are
manufactured in
laboratories with
equipment and
knowledge.
• The raw materials
used for production
are not complex.
• The suppliers'
bargaining power
therefore does not
pose a threat to Novo
Nordisk's future.
• 93% of Novo
employees say it is a
great place to work so
Novo can recruit the
best employees in the
pharma industry.
• Government regulations
in the sector impose
stringent licensing and
regulatory criteria that
must be satisfied before
a company can begin
selling. This makes it
challenging for
newcomers to enter the
industry.
• Because R&D
expenses are high,
capital expenditures are
similarly significant.
• By lowering prices,
cutting costs, and
offering new value
propositions to the
market, new entrants
may exert pressure on
Novo Nordisk A/S and
innovate new ways of
doing things.
• The 3 leading
companies Novo, Lilly
and Sanofi significant
percentage of the
industry.
• This indicates that they
will engage in aggressive
competition to establish
themselves as market
leaders
• .• Because the firms in
the industry employ a
variety of techniques,
they are all distinct from
one another. The items
produced within the
industry in which Novo
Nordisk A S works are
significantly varied,
which causes them to
collide with one another
regarding strategy.
Novo Nordisk Poter`s Analysis
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A well-known model that aids managers in concentrating on the five most significant competitive forces, or possible threats, in the external
environment is Michael Porter's Five Force Model (Porter, 1979).
Porter used the word "microenvironment" to describe these factors in contrast to the more all-encompassing phrase "macro environment."
They are made up of nearby factors that have an impact on a business's capacity to satisfy clients and turn a profit (Porter, Argyres and
McGahan, 2002).
These five elements were deemed substantial threats by Porter because they have an impact on the expected profits of businesses competing
in the same sector (Jones and George, 2020).

10. The importance of research and development (R&D) to the pharmaceutical industry is demonstrated not only by the cumulative R&D
expenditures of the industry as a whole, but also by the R&D expenditures of individual companies.
The overall worldwide expenditure on research and development by pharmaceutical and biotechnology businesses climbed from USD
108 billion in 2006 to USD 141 billion in 2015. (www.evaluate.com, 2016)
Novo Nordisk R&D activity succeeded in creating differentiated products to put them in the leader position in important therapeutic areas
as Diabetes and Obesity.
With current strong product patented portfolio such as Ozempic ,Tresiba and Rybelsus followed by a rich pipeline of innovative products
that will widen the product portfolio in future and can secure the leadership position for Novo for a while.
However, in such high dynamic market derived by technology and innovation Novo Nordisk should continue investing in R&D to enrich
it`s pipeline with new products that can keep it in the leader position in it`s targeted therapeutic areas and to match the new entries from
direct competitors (Eli Lilly and Sanofi) .
And with the risk of substitution in the insulin market with the rise of new insulin delivery technologies and the rise of bionic insulin
hope for Type 1 Diabetes patients Novo Nordisk should conquer new therapeutic areas beside Diabetes and rare diseases .
Conclusion
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11. References
• ‘Another year of crazy hiccups’: Russia and China pose new threats to global supply chain. (n.d.). Washington Post. [online] Available
at: https://www.washingtonpost.com/business/2022/03/18/russia-ukraine-war-china-covid-supply-chain/.
• IDF Diabetes Atlas 10th edition 537 million people worldwide have diabetes. (2021). [online] Available at:
https://diabetesatlas.org/idfawp/resource-files/2021/07/IDF_Atlas_10th_Edition_2021.pdf.
• Jones, G.R., George, J.M. and C W L Hill (2000). Contemporary management. Boston: Irwin/Mcgraw-Hill.
• Kruse-Jacobsen, M. (2022). Novo Nordisk Annual Report 2021. [online] Available at:
https://www.novonordisk.com/content/dam/nncorp/global/en/investors/irmaterial/annual_report/2022/novo-nordisk-annual-report-
2021.pdf.
• Novo Nordisk Pharmatech. (2022a). About Novo Nordisk Pharmatech - Learn more about us. [online] Available at:
https://novonordiskpharmatech.com/company/.
• Novo Nordisk Pharmatech. (2022b). Insulin Human AF Insights. [online] Available at: https://novonordiskpharmatech.com/insights/
[Accessed 23 Oct. 2022].
• Porter, M. (1979). How Competitive Forces Shape Strategy. [online] Harvard Business Review. Available at:
https://hbr.org/1979/03/how-competitive-forces-shape-strategy.
• Porter, M., Argyres, N. and McGahan, A.M. (2002). An Interview with Michael Porter. The Academy of Management Executive (1993-
2005), [online] 16(2), pp.43–52. Available at: https://www.jstor.org/stable/4165839? [Accessed 23 Oct. 2022].
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12. References
• ‘Richardson, K. (2022). Form 20-F 2021. [online] Available at:
https://www.novonordisk.com/content/dam/nncorp/global/en/investors/irmaterial/annual_report/2022/novo-nordisk-form-20-f-2021.pdf
[Accessed 23 Oct. 2022].
• Shortage of Ozempic (semaglutide). (2022). [online] Available at: https://www.ema.europa.eu/en/documents/shortage/ozempic-
semaglutide-supply-shortage_en.pdf.
• www.evaluate.com. (2016). Pharma commercial intelligence, news & analysis | Evaluate. [online] Available at:
http://info.evaluategroup.com/rs/607-YGS-364/images/wp15.pdf. [Accessed 23 Oct. 2022].
• www.novonordisk.com. (2022a). Strategic aspirations for 2025. [online] Available at: https://www.novonordisk.com/investors/novo-
nordisk-strategic-aspirations-for-2025.html.
• www.novonordisk.com. (2022b). What we do. [online] Available at: https://www.novonordisk.com/about/what-we-do.html.
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