The Problem of Too Much Demand

Novo Nordisk spent a hundred years being admirably boring.

It was founded in Denmark in the 1920s to make insulin, which had just been discovered. Slowly it became one of the two or three biggest diabetes companies in the world. It was controlled by a foundation, it thought in decades, and nobody outside the industry talked about it.

Its scientists had spent many years studying a group of molecules called GLP-1s. These copy a natural hormone that controls blood sugar — and, as it happens, appetite.

Out of that patient work came a drug called semaglutide. It was approved for diabetes in 2017, and for weight management in 2021.

What happened next had never happened before in the history of medicine.

The trial results showed weight loss of around fifteen per cent. Those results met social media, celebrity culture, and a world where a billion people are affected by obesity.

Demand went straight up. The brand name stopped being a brand name and became an ordinary word — in comedy programmes, in newspaper headlines, in daily conversation.

Prescriptions ran into the millions. Surveys suggested that an enormous part of the adult population wanted it. And the company's factories — built for the calm, predictable business of diabetes care — were suddenly asked to supply a global phenomenon.

The stock market did the rest. In 2023 Novo Nordisk passed LVMH and became the most valuable company in Europe: a Danish insulin maker worth more than everything Denmark produces in a year.

Economists noticed that much of Denmark's economic growth now came from one company. Commentators reached for an uncomfortable comparison — Finland, Nokia, and what happens to a small country connected to one big engine.

Then the good news started behaving like a crisis.

Demand was bigger than the factories almost immediately, and stayed bigger for years. You cannot increase this kind of medicine like software. A new sterile production line takes years to build and to approve.

So the company did things no marketing department ever dreams of. It deliberately slowed down launches in new countries. It held back starter doses so that existing patients could keep their supply. In effect, it asked doctors to stop creating new customers.

Diabetes patients complained that they could not get their medicine because of demand for weight loss. Regulators began asking questions. In America, during the official shortage, some pharmacies legally produced their own unauthorised copies — competition created out of nothing by the company's own inability to supply.

Money answered part of it. Novo committed tens of billions to new plants in Denmark, France and the United States, and its foundation moved to buy one of the world's biggest contract manufacturers.

But capacity was only the first front.

American politics opened a second. The price was around a thousand dollars a month — for a drug that most of the population could arguably use. The company became a regular exhibit in Senate hearings about medicine prices.

And a competitor opened a third. Eli Lilly arrived with a rival drug whose trials showed greater average weight loss. The two companies settled into a race: new molecules, tablet versions, trial results traded like artillery.

Running underneath all of it was the strangest question in the whole case.

How big is this market, actually?

Forecasts for the obesity-drug market in 2030 ranged from fifty billion dollars to a hundred and thirty billion. That is not a forecast. That is a confession that nobody knows.

And every decision depended on it. Every factory, every production line, every hiring plan.

Build for the low number and you lose the market. Build for the high number and you are left with enormous empty factories.

Then the market changed its mind about the story. As competition grew and the newest trial results were less spectacular than hoped, the share price fell heavily from its top. The miracle was becoming an industry.

Ahead of the company sits the oldest cliff in the medicine business. The key patents end in major markets in the early 2030s. After that, cheaper copies will do to the price what copies always do.

The defence is the usual one, at an unusual scale. Take today's extraordinary earnings and pour them into research: tablet versions, next-generation molecules, trials in heart disease, kidney disease, liver disease, even dementia. Then, when the cliff arrives, something new is already standing on the other side.

Whether that works is being answered right now, one set of trial results at a time.

And notice something about this case. A hundred-year-old company built the product of the decade. It was crowned Europe's champion. It changed its own country's economy. It met a demand it could not supply. And then it was repriced when success became ordinary.

There is no villain anywhere in the story.

So here is the question for anybody who plans. Your plan assumes a number — for demand, for growth, for how long the good times last. What is the widest range you would defend out loud? And what would you build differently if you said the range instead of the number?