Novo Nordisk SWOT and PESTLE Analysis

Strength

1. Global leader in diabetes care: Novo Nordisk created a blue ocean strategy by shifting its customer focus from doctors to the end users – the patients. To address the needs of the patients and prevent them from the uncomfortable mode of insulin administration, Novo Nordisk launched the first user friendly insulin delivery product – the Novo Pen. This product empowered the patients to self-administer insulin without having to deal with the discomfort of syringes. Following this, it launched Novolet (a pen device for insulin self-injection) to preserve its dominance in the diabetes care segment. Even today, Novo Nordisk is the world leader in diabetes care products. Diabetes care contributes to 81% of sales growth of the company. Novo Nordisk diabetes care products are used by 27.7 million people around the globe. A solid performance of drugs Tresiba, Victoza, Saxenda and NovoRapid in 2017 has kept the company growing. The company’s adherence to the Triple Bottom Line principle of balancing financial, social and environmental considerations helps in serving the interest of all its stakeholders.

2. Evolving product portfolio: Novo Nordisk is investigating the potential treatment for NASH, a progressed stage of non-alcoholic fatty liver disease which does not have approved treatment currently. Obesity is not recognized as a ‘disease’ which requires treatment and hence, there have not been medical advances in the area. To overcome this, Novo Nordisk has launched products to manage obesity in patients with weight related health problems and obesity. E.g. Saxenda, sales of Saxenda increased by 62% in Danish Kroner, in 2017. Novo Nordisk has a lot of drugs in the pipeline (phase 1, phase 2 and Phase 3 clinical trials) in the therapy areas of diabetes, obesity, haemophilia A and growth disorders which are promising and will provide leverage to the company when launched.

3. Focus on innovation through R&D: In 2017, Novo Nordisk launched Victoza, an injectable prescription medicine drug that helps people with type-2 diabetes to lower blood sugar and obesity, and also reduces the risk of major adverse cardiovascular events in patients with type 2 diabetes and established cardiovascular risk. Novo Nordisk is set to enter a new category of diabetes therapy in 2020: GLP-1 analogue Semaglutide, which is a once-a-day oral diabetes therapy formulation. This therapy formulation will address the issues of cardiovascular diseases and obesity in addition to controlling diabetes. The PIONEER-2 clinical trial study of this therapy formulation has shown results better than the existing drugs in the market (of Eli Lilly and Boehringer Ingelheim). The phase 3a studies proved that the drug reduced blood sugar levels and weight better than Merck’s diabetes bestseller Januvia. This drug is expected to be a blockbuster and enhance Novo Nordisk’s position further in the diabetes care market. Novo Nordisk is also researching the potential use of stem cell therapy in management of diabetes and it has moved several steps closer in this avenue.

4. Capital expenditure to drive growth: In 2018, capital expenditure is expected to be around DKK 9.5 billion. Investments have been made in new production facility for diabetes Active pharmaceutical ingredients in USA, new diabetes care filling facility and expansion of manufacturing capacity for biopharmaceuticals in Denmark. There is a plan to increase the sales and distribution costs to support commercialisation for launch of Ozempic.

Weakness

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Opportunity

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Threat

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Political

1. Price control by Government: The Company is exposed to potential price curbs in the US and 30% of the company’s sales are in the US. The US President has criticized the pharmaceutical giants and is pressurizing the companies to reduce drug prices. This move of the US government might decrease the revenues for Novo Nordisk. On 8th June, Danish newspaper reported that the management was planning to layoff around 3000 employees and is strategizing the exact layoff size, location etc. It is doing so in order to save costs to protect itself from the pricing pressure in the US.

2. Promotion of cheaper drugs by Government: Novo Nordisk holds 60% share in Indian insulin market. The promotion of generic products in India by the Government can prove to be a hindrance in the sales of the company. The government is also trying to pave the way for cheaper drugs through biosimilar promotion. Biosimilars are prevalent in the EU since 2006. In 2010, ObamaCare policy paved the way for biosimilars in the US. Such policies can decrease the sales for Novo Nordisk as its portfolio consists of researched drugs which are relatively expensive.

Economic

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Social

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Technological

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Legal

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Environmental

1. Addressing climate change: Novo Nordisk believes in doing business in an environmentally responsible way. It focuses on reducing direct carbon emissions as well as indirect emissions, which include collaboration with raw material suppliers to reduce their CO2 emissions. It also reduces emissions related to business travel and company owned cars. The production and consumption at the company occurs in compliance with US Sustainable Development Goal 12. In 2015, it joined RE100 initiative and pledge that all of the power consumption will be derived from renewable energy sources by 2020. In 2017, the share of electricity from renewable sources was 71%

2. Steps for water conservation: The production of insulin is water dependent and so is the filling. High quality water is required in the production of Novo Nordisk’s products, which requires a number of treatment steps. The production processes in Novo Nordisk are optimized to reduce water consumption. As a part of Environment management system, water saving projects are conducted at their production sites.

3. Waste Management: The Kalundborg Industrial Symbiosis is an example of industrial symbiosis which establishes coordination amongst different industries and enables them to use each other’s by-products and wastes. An initiative of this symbiosis is the biogas plant which will generate biogas using the fermentation slurry from the company’s Active Pharmaceutical Ingredient production. The waste generated from insulin pen production is also recycled.