--:-- [Sound of liquid gold being poured]
--:-- Host: In the world of big pharma, this is the sound of liquid gold. An assembly line in Denmark fills glass vials with semaglutide. It's the active ingredient in the injectable drug that's become a bona fide cultural phenomenon.
--:-- Host: Where would you say Ozempic ranks in terms of successful drugs that you've covered?
--:-- Guest: One of the most successful of all time. It's up there from a financial perspective, but also just from a cultural impact perspective. It's one of the biggest deals. That's rare.
--:-- Host: Tell me about the company behind this blockbuster drug.
--:-- Guest: Well, the company is Novo Nordisk, which is based in Denmark, and they've been around for about 100 years. Most of that time, probably a lot of Americans never heard of it.
--:-- Host: Over the last decade, our colleague Pete Loftus has watched Novo Nordisk grow into a pharmaceutical juggernaut.
--:-- Guest: Novo is one of the most valuable companies in Europe by stock market capitalization, thanks to the spectacular success of Ozempic and its sister drug, Wegovi. Last year, their combined sales of just those two drugs were over $26 billion.
--:-- Host: For Ozempic, I think it was up about 25% from the year before.
--:-- Guest: So on paper, the company is still growing tremendously. Tremendous growth, strong sales, rising profits. Novo is a success story, which makes the latest news from the company all the more surprising.
--:-- Host: The CEO of Novo Nordisk for the past eight years is leaving the company. By leaving, do we mean he's resigning? Is he retiring? What's going on?
--:-- Guest: This is not part of an orderly plan for him to go spend time on the beach and enjoy retirement. This was not his choice. He's essentially being pushed out.
--:-- Host: Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza.
--:-- Guest: It's Wednesday, May 21st.
--:-- Host: Coming up on the show, Ozempic is a huge hit. So why is the drugmaker's CEO out?
--:-- Guest: For most of its 100-year history, Novo Nordisk was known mainly as a maker of insulin. Novo's corporate headquarters outside of Copenhagen is even designed to mimic the winding structure of an insulin molecule.
--:-- Host: The company is also uniquely Danish in its corporate structure. It's unusual because it's controlled by a nonprofit foundation in Denmark.
--:-- Guest: And by Denmark standards, there are actually quite a few of these among their larger companies. And it's essentially a way for Denmark, which, you know, is a country that has some socialist aspects, to embrace capitalism, but in a way that they feel helps benefit more than just the shareholders of a company.
--:-- Host: So Novo Nordisk the Company is overseen by the nonprofit Novo Nordisk Foundation.
--:-- Guest: And it's the foundation that decides how to reinvest some of the company's profits. To do things like invest in medical research or life sciences in some way that they feel potentially can help people in the future.
--:-- Host: Novo's corporate structure effectively means that its CEO has to answer to the foundation.
--:-- Guest: And since 2017, Novo's CEO has been Lars Jurgensen. He's spent pretty much his entire career at the company.
--:-- Host: He started out as a health economist very much a creature of the Novo culture
--:-- Guest: And what was his tenure like? His tenure I would say would have been the envy of many CEOs in any industry. During that time the company stock price at least until the middle of last year went up something like 600%.
--:-- Host: Novo Nordisk is one of the biggest gainers this morning.
--:-- Guest: Novo Nordisk, yesterday, the stock had the best session in about two and a half years. And sales were through the roof.
--:-- Host: Ozempic launched in the U.S. in 2018, just about a year after Jorgensen took over as CEO.
--:-- Guest: The drug is approved for treating diabetes, but people quickly realized that the weekly doses didn't just help control blood sugar, they could help control weight.
--:-- Host: And that's when Ozempic really took off.
--:-- Guest: He oversaw this big change at the company where they went from this very reliable supplier of insulin to now having these newer types of drugs to help first treat diabetes and then weight loss.
--:-- Host: Right. All right, have you heard of this so-called miracle drug, Ozempic?
--:-- Guest: And so it was during his tenure that the company came out with Wegovi around 2021, the same drug, but specifically for weight loss.
--:-- Host: To a new weight loss drug that helps some people shave off 15% of their weight.
--:-- Guest: And that was really like the first significant anti-obesity drug to come out in a long time.
--:-- Host: Ozempic and Wegovi are what's known as GLP-1s, now one of the most successful drug categories in the industry.
--:-- Guest: Novo's biggest challenger in the space is an American company, one that it's competed with for something like a century, Eli Lilly.
--:-- Host: Welcome to Lilly, where every day we turn groundbreaking discoveries into life-changing medicines that impact millions worldwide.
--:-- Guest: So Eli Lilly is their biggest rival, and the companies have spent years going back and forth trying to outdo each other.
--:-- Host: And Eli Lilly also has a similar past in the sense that they were essentially the earliest supplier of insulin in the U.S. 100 years ago, and that remains a big part of their business.
--:-- Guest: But where the competition really ratcheted up was the discovery of these GLP-1 drugs.
--:-- Host: What did that look like post-Ozempic?
--:-- Guest: Post-Ozempic, what that looked like was Lilly trying to really speed things up to get their answer out there, to try to find something even better.
--:-- Host: And their answer was not just to come out with another GLP-1 drug, but to come out with one that has a more powerful effect.
--:-- Guest: The result would be a blockbuster for Eli Lilly.
--:-- Host: When the Indiana company presented early data of its new drug at a medical meeting, one specialist made a bold prediction.
--:-- Guest: That while Ozempic was the gorilla of GLP-1s, that what Eli Lilly is doing is the King Kong of GLP-1s.
--:-- Host: Okay. In 2022, Lilly released its answer to Ozempic, Monjaro, approved for type 2 diabetes.
--:-- Guest: The following year, the company came out with its answer to Wegovi. Lilly called its weight loss drug ZepBound.
--:-- Host: Eli Lilly's drug, ZepBound, has been shown in studies to help people lose more weight than Wegovi.
--:-- Guest: So we're talking between 20 to 25 percent of someone's body weight compared with, you know, 15 to 20 percent for Wegovi.
--:-- Host: And so that's been Eli Lilly going out there and saying, Novo, that's great what you did, but we think we have something better.
--:-- Guest: Soon, Novo CEO Lars Jurgensen saw his company's lead slipping.
--:-- Host: Not only was Novo's old rival eating up market share, Novo also found itself struggling to keep up with demand.
--:-- Guest: The company just didn't have manufacturing capacity to produce Ozempic and Wagovi fast enough.
--:-- Host: And shortages became common, which also opened the way for knockoff versions of the drugs to further erode Novo's market share.
--:-- Guest: Jurgensen eventually resolved the manufacturing problem.
--:-- Host: But what investors were really after was the next breakthrough the next Ozempic
--:-- Guest: Novo Nordisk has been developing its own combination drug that they call Cagrosima
--:-- Host: And this was something that Novo Nordisk itself, as well as investors, were really counting on.
--:-- Guest: By then, the end of 2024 was approaching. And Novo was hyping up Cagrosima as its new breakthrough drug.
--:-- Host: It just needed to prove it with a major clinical trial. That's next.
--:-- Host: This episode is brought to you by LifeLock. When you visit the doctor, you probably hand over your insurance, your ID, and contact details.
--:-- Guest: It's just one of the many places that has your personal info.
--:-- Host: And if any of them accidentally expose it, you could be at risk for identity theft.
--:-- Guest: LifeLock monitors millions of data points a second.
--:-- Host: If you become a victim, they'll fix it. Guaranteed. Or your money back.
--:-- Guest: Save up to 40% your first year at lifelock.com slash podcast. Terms apply.
--:-- Host: Novo Nordisk needed a big win.
--:-- Guest: And its CEO, Lars Jurgensen, was hoping that cagracima, a drug they'd been developing to treat obesity and type 2 diabetes, would be able to deliver.
--:-- Host: For our confidence in the Kagersema molecule is very, very high.
--:-- Guest: Good to hear, Martin. Very encouraging.
--:-- Host: The hope was that Kagersema would be even more effective for weight loss than Eli Lilly's ZEPBound.
--:-- Guest: And so Novo Nordisk had set this expectation that this potential new drug could help people lose 25% of their body weight, which would be a higher bar than what ZEPBound has shown for the most part.
--:-- Host: But when the data from the clinical trial came out...
--:-- Guest: It just wasn't as good as expected.
--:-- Host: Shares of Novo Nordisk plunging by the most on record today after disappointing data from its experimental obesity drug.
--:-- Guest: It was basically about 22%.
--:-- Host: But I think the stakes are so high in this industry and among investors that even this small shortfall was a huge disappointment.
--:-- Guest: In a single day in December, Novo Nordisk's share price dropped 20 percent.
--:-- Host: And it cut $100 billion worth off their market cap.
--:-- Host: And you just don't see that very often for a large pharmaceutical company.
--:-- Guest: It's pretty incredible to think, you know, a few years ago, the idea of a drug being able to reliably help people lose up to 15 percent of their body weight was unthinkable.
--:-- Host: And now they're like, oh, only 22 percent? Sorry.
--:-- Guest: Like, that's mind-blowing.
--:-- Host: Well, one thing I've learned is that investors get used to things pretty quickly and they want the next thing.
--:-- Guest: Pretty soon, the Novo Nordisk Foundation, the nonprofit running Novo Nordisk the company, started to have concerns over their ability to keep pace with Eli Lilly.
--:-- Host: And in January, those fears became a reality.
--:-- Guest: New data showed that U.S. prescriptions for Lilly's Zepbound had beaten Novo's Wegovi for the first time.
--:-- Host: By pharmaceutical industry standards, that's a pretty fast rap.
--:-- Guest: Zepbound came out at the end of 2023, and in just a year, it was able to take the top spot from Wegovi.
--:-- Host: And so at some point in the last several weeks, the chair of the Novo Nordisk Foundation expressed his concerns to the board of directors of the drug company.
--:-- Guest: And that began a discussion that they should speed up their timelines for a CEO transition.
--:-- Host: And so, after eight years of leading Novo and helping it become one of the most profitable drug makers in the world, Jorgensen's time was up.
--:-- Guest: Last Friday, the company announced that the CEO was leaving.
--:-- Host: Given the circumstances we and Lars Jorgensen have concluded that it is in the best interest of the company that he steps down which is what we have announced today
--:-- Guest: Has Jorgensen himself said anything about the decision I mean he has said in interviews that he was surprised you know that he proud of his time there, what he did.
--:-- Host: After the announcement, Novo employees gathered to cheer on their departing boss as he descended a winding staircase at the company's headquarters.
--:-- Guest: With Jurgensen headed for the exit, the company announced it would bring back someone with deep institutional knowledge, a previous CEO.
--:-- Host: Joining the Novo Nordisk Drugmaker Board of Directors will be the old Lars.
--:-- Guest: Lars Sorensen, the former CEO and the outgoing CEO, are both named Lars.
--:-- Host: So it's a case of, you know, out with the new Lars, in with the old Lars.
--:-- Guest: The old Lars, Lars Sorensen, was actually Lars Jurgensen's predecessor.
--:-- Host: Sorensen was CEO at the time when Nova was just beginning to set the stage for its GLP-1 success.
--:-- Guest: Now he'll be returning to oversee the company's future.
--:-- Host: So he's not coming back as CEO, I should make that clear.
--:-- Guest: But he is coming back to the drugmaker's board of directors.
--:-- Host: Novo Nordisk says it won't be changing its strategy, despite the shakeups at the top.
--:-- Guest: Thank you. I am on the headphones now.
--:-- Host: Well, thank you for being here and being so patient with all of our tech stuff.
--:-- Guest: Last year, I interviewed Lars Sorensen, the returning Lars, for our series Trillion Dollar Shot, which is about the rise of GLP-1 drugs.
--:-- Host: At the time, I asked him about Novo's rivalry with Eli Lilly.
--:-- Guest: Who would you say is winning the competition right now?
--:-- Host: It's difficult for me to pass Josh Brennan.
--:-- Guest: I think it's about on par.
--:-- Host: Sorensen told me he had the highest respect for Eli Lilly and that they keep each other on their toes.
--:-- Guest: So I think both companies benefit from this very intense competition.
--:-- Guest: And so I only welcome it.
--:-- Host: I would have been more worried if we didn't have competition, because then there's always the risks that complacency sets in.
--:-- Guest: We asked the foundation yesterday if Sorensen still welcomes the competition.
--:-- Host: The foundation had no further comment.
--:-- Guest: In the meantime, both Novo and Lilly are pressing on with the next big thing.
--:-- Host: Promises of more effective injectables, a more convenient pill, and even more weight loss.
--:-- Guest: What does this leadership shakeup sort of say about the pharmaceutical industry right now, like especially in the weight loss space?
--:-- Host: Yeah, they really highlight the what have you done for me lately mindset of investors.
--:-- Guest: So even though objectively on paper, Novo Nordisk has been phenomenally successful.
--:-- Host: Investors are so focused on the future.
--:-- Guest: So that's one thing.
--:-- Host: But I would also say it just illustrates how big people think this broad market could become.
--:-- Guest: Really, it's on a trajectory to just be one of the biggest of all time.
--:-- Host: These GLP-1 type drugs work not only for diabetes and weight loss, but it seems like with each passing week, there's some piece of information.
--:-- Guest: A study or whatever that seems to suggest some new benefit.
--:-- Guest: And so I think any sort of setback is kind of viewed as a threat and could lead to something like what we're seeing.
--:-- Host: That's all for today, Wednesday, May 21st.
--:-- Guest: The Journal is a co-production of Spotify and The Wall Street Journal.
--:-- Host: Additional reporting in this episode from Dominic Chopping.
--:-- Guest: Additional production from Adrienne Murray Nielsen.
--:-- Host: Thanks for listening. See you tomorrow.
