by pna
By Xinhua writers Yang Jingzhong, Devapriyo Das
Innovation and tailor-made medical solutions that suit the purchasing power of a variety of customers, could see Denmark's biggest pharmaceutical company Novo Nordisk meet the challenges of a weakened world economy and expiring patents on drugs.
Novo Nordisk, a flagship Danish pharmaceutical company, believes investing in innovation and meeting the price expectations of different customers will help it grow in a sustained way for decades to come.
"Our strategy is one of making a full portfolio of insulin and other diabetes medications available. Some at low cost, some at higher cost," said Novo Nordisk CEO Lars Rebien Soerensen in a recent exclusive interview with Xinhua.
"We have the low end of the generic range to make sure we can live up to our social responsibility and the demand for patients who have little income. Meanwhile, we make the bulk of our earnings and incomes from innovative, patent-protected products," he said.
Whereas the company has historically driven development of innovative medicines, it now employs a so-called 'full-portfolio strategy,' which guarantees that diabetes patients of low income have access to its generic products.
Moreover, as Soerensen said, "disease is not influenced by economic up or down turns", which makes the company financially counter-cyclical and shielded from economic downturns, like those created by the ongoing sovereign debt crisis in Europe.
In fact, Novo Nordisk made operating profit of 3.95 billion U.S. dollars in 2011, representing an 18 percent rises from the previous year, and is forecasting full year operating profit of around 15 percent for 2012. It remains the best-capitalized company on the Copenhagen Stock Exchange, beating industrial manufacturers involved in such activities as shipping, wind-turbine production and beer brewing.
Headquartered in Bagsvaerd, some 10 kilometers north of Copenhagen, the company has pioneered global diabetes research and drug development since 1923. It is the world's biggest insulin producer, while diabetes care constitutes its largest business segment.
Hiring about 32,700 employees in 190 countries, the company realized a total of 11.5 billion U.S. dollar sales globally in 2011.
MARKET STRATEGIES
The company's success is pegged both on its robust research and development (R&D) pipeline, which produces a steady flow of market-leading treatments, as well as a growing diabetes problem in developing countries. These countries are also offering healthcare services to more and more of their citizens, which in turn is boosting demand for diabetes and other treatments.
Yet, Novo Nordisk is shaping its future policies in line with market developments, for instance, by curbing operations in Europe. Here, demand for pharmaceutical products has contracted owing to smaller healthcare budgets of national governments, particularly in heavily-indebted, slow-growing southern European economies.
"What we anticipate to see in Europe over the next years is a divide between northern and southern Europe. People in southern Europe increasingly will be using old types of medication while the new, elevated drugs we intend to launch, will primarily find reimbursement and launch in northern European countries," Soerensen said.
This will make it difficult to access new medicines in Europe, even as patents are set to expire on a number of well-selling drugs, worsening incentives and resources with which to innovate.
"The global pharmaceutical industry is not being able to develop its top line (revenues) at the moment not necessarily because of the European Union debt crisis, but because the pharmaceutical companies find it difficult to innovate and come up with new products when they lose very big products to patent expiration," he said.
But the debt crisis has meant delays in drug approvals by European authorities, and longer waiting times for payments for drug deliveries.
Novo Nordisk's response has been to cut its costs in Europe, and invest instead in its growth regions, namely the U.S. and emerging markets like China, Soerensen said.
The company will also focus on developing new drugs which offer better therapy, command premium prices, and thereby offset sales lost to cheaper generic versions, even as it continues to manufacture generic medicine.
INNOVATIVE DRUGS
Diabetes, a chronic disease, currently has no cure. But treatments, including using protein therapies such as those pioneered by Novo Nordisk, can successfully stabilize blood sugar levels.
"What you want to do with protein drugs is to make them work in the body on the cells and tissues where insulin should normally have been working, except that the patient is lacking these proteins," said Mads Krogsgaard Thomsen, Novo Nordisk's Chief Science Officer.
"What we are doing is adding back to the patient these proteins in the most optimal way. We do that through protein design, and we inject them, typically once or twice a day into the body, and then you get back the function of the protein that you are lacking owing to diabetes," he told Xinhua in an interview.
Now, the company is trying to develop oral insulin, where insulin is ingested through the mouth in tablet form. If and when it arrives, this product would revolutionize treatment of diabetes as it would make it easier to take the product, and thereby allow patients intensify their therapy more easily and quickly. However, it is notoriously difficult to make as the insulin tablet would have to survive stomach acids before being absorbed into the blood stream.
Commenting on how far Novo Nordisk researchers have got with this product, Soerensen said that the technologies they have developed "makes it reasonable to assume that we can deliver an insulin tablet within the next six to eight years."
He added the product is an insulin analogue, or variation of the insulin molecule, which is combined with a formulation technology to provide a long-lasting insulin.
Meanwhile, the company in concentrating on development of 'therapeutic proteins,' such as insulin, and has phased out development of 'small molecule drugs,' which refer to active substances that make up most commercially-available drugs.
CHINA BLUEPRINT
Soerensen said the company's main growth drivers are the U.S., China and other emerging markets, with business expected to grow annually at between 10-15 percent, 15 percent and 15 percent or more, respectively, in those markets. The emerging markets in particular will see growth "primarily based on generic insulin and low cost versions of new insulin."
China is of "strategic importance", given that Novo Nordisk held 63 percent of China's total insulin market measured by volume, in 2011. The company has been present in China since the 1960s, and set up Novo Nordisk (China) Pharmaceuticals Co., Ltd. in 1994. It opened a packaging plant in Tianjin, in 1995, and later invested 400 million dollars to establish an insulin filling plant in the city, in 2008.
Its biggest R&D center outside Denmark employees 130 scientists and was opened in Beijing in 2002. This September, the center was expanded through an investment of 100 million dollars making it possible to increase the number of scientists to 200 while still having room for future growth, the company said.
"We are manufacturing all our devices, also for exports, in China, and we have built the world's largest filling factory there. So China is of utmost importance to us," Soerensen said.
Strong growth from China is predicated on some worrying numbers: 9.7 percent of China's 1.3 billion-strong population is believed to suffer from diabetes, according to data released by the Chinese Medical Association's Diabetes Society in Nov. 2011.
In future, Novo Nordisk expects to implement a program in collaboration with China's Ministry of Health, where it will target China's rural population, so as to educate Chinese health professionals to identify, diagnose and treat people with diabetes.
The company sees this program as being in step with the Chinese government's objective of extending public health care services to a broad swathe of the population and builds on the long experience Novo Nordisk has with similar programs in more densely populated areas.
This will mean an expansion of the company's staff and operations in China, as well as developing a special, educational curriculum for heath professionals there, to deliver the correct care to diabetes patients.
On the company level, Soerensen expects Novo Nordisk to achieve "double digit growth rates on the top line", to introduce new products, and to undertake no major acquisitions, in the next five years.
That will translate into improved margins and an operating profit that "is likely to grow more than the top line," he added. By not making acquisitions, the company will have surplus liquidity which will allow it to continue to buy back equities.
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