Dane in America

Nov 01, 2014

Everyone knows that Novo Nordisk is a tightly focused enterprise neatly matched to a big disease footprint—diabetes, where it commands nearly 50% of the global insulin market. A critical—and less apparent—driver of the company's success has been its long journey to build a viable presence in the US, a market whose size and reach makes it a proving ground for any business with global aspirations. Prior to 2001, Novo Nordisk was just a bit player here, with annual sales below the $300 million mark. Paced by some risky investments to build a US sales force literally from scratch, the company raised that number tenfold in the years up to 2008, and then more than doubled it again after the introduction in 2009 of its breakthrough glucagon-like peptide-1 (GLP-1) analogue, Victoza. This year, Novo Nordisk's US sales are slated to surpass $7 billion, with Victoza alone racking up a 60%-plus share of the GLP-1 market.

To take a closer look at Novo Nordisk's blueprint for the US, Pharm Exec met last month with Senior Vice President for North America Jesper Hoiland. Hoiland, 54, a 27-year company veteran who assumed his post in August 2013, is the first native Dane to lead the US business. It's a distinction that Hoiland sees as an opportunity to create a broader cross-cultural perspective and promote better understanding of a complex—and often non-transparent—operating environment for medicines. In the following Q&A, Hoiland discusses his first year on the job at the company's regional headquarters in Princeton, including an unsettling initial encounter with the growing clout of pharmacy benefit manager (PBM) medicines gatekeepers; looming price wars; observations on the vital importance of stakeholder outreach in a transactional health system driven largely by relationships; all the advance planning required to unleash the promise of the eight to 10 new compounds Novo Nordisk hopes to commercialize by the end of the decade; and implementing what he sees as the three essential contributors to CEO leadership success: People. People—and People.

PE: You joined Novo Nordisk in 1987. What was your first assignment? How have the company's clinical and business practices changed over the past 27 years?

Hoiland: My first job as a young manager at Novo back in 1987 seems inconceivable today. The interesting part is that I was assigned to the US, at a time when we had virtually no presence here. Between Novo and Nordisk, which were still separate companies then, we had less than 75 people, including sales reps. Among other things, I was tasked to estimate the number of cattle Novo would need each year to fill the demand for human insulin, which was mostly extracted from cow glands. This depended, in turn, on accurate forecasts of the growth of the US diabetes market. Getting the right estimate was also important because in the 1980s the US dollar was highly volatile. All that seems fanciful now given the advances in both science and information.

Looking back over the years, our business practices have been affected most notably by information technology. In the 1980s, as the youngest manager on staff, I was good at adapting to the new data management tools coming on stream, which explains why I became the first person outside the finance department to be given a personal computer. I recall being asked by my supervisors to figure out what other uses Novo could find for it. Ironically, today I hardly use my desktop because I prefer to meet and talk to people directly. Personal interactions are the basis of my management style.

Not for sale

PE: Further to business practices, hasn't Novo Nordisk's longstanding status as having a foundation as its majority shareholder kept it remarkably stable over the years, particularly compared to the short-term business pressures that confront publicly held enterprises?

Hoiland: Our company history is unique. We began as two companies, Nordisk and Novo, founded in 1923 and 1925, respectively, led by Danish physician researchers and pharmacists with a passionate scientific interest in diabetes—a condition that, due to the discovery of the insulin hormone by two Canadian researchers, was then just emerging as a treatable chronic disease. The two new companies led the world in turning this discovery into a product with clinical—and commercial—applications. Ninety years later, and as a combined company since 1989, we are still the leader, not just in Europe, but globally. We are able to build on decades of work in progressing the treatment of diabetes, from the accessibility, safety, and stability of man-made insulin to innovations in therapeutic delivery devices as well as investments in diabetes control and prevention in diverse community settings—our products are now marketed in 180 countries.

The focus on diabetes was made possible by the decision of both companies to structure themselves as a foundation under Danish law, Nordisk in 1926 and Novo in 1951. This allowed profits to be plowed back into research and treatment activities rather than be subject to tax. Dr. Hans Christian Hagedorn, a co-founder of Nordisk and inventor of the first bulk manufacturing process for insulin derived from the bovine pancreas, put most of the company's early revenues into research, including founding the Steno Memorial Hospital, which exists to this day and has had a distinguished record over the years in treating more than half of the diabetic patients in Zeeland and Copenhagen. The Foundation was also the force behind our very early investments in the enzymes that trigger many metabolic processes, the understanding of which paved the way for the development of reliable, artificially derived sources of insulin. That sister company, Novozymes, is now the world's largest producer of enzymes for industrial and human uses; as with Novo Nordisk, the Foundation is the majority shareholder.

At present, more than 70% of votes are controlled by the Novo Nordisk Foundation. This gives management the ability to deflect two negative influences on proper business planning: M&A pressures driven by activist shareholders, whose only motive is scoring a run-up in the stock price; and financial reporting biased toward short-term quarterly results at the expense of long-term performance. Novo Nordisk has never been for sale, even though over the years some prominent competitors have tried to buy us. We are one of the few multinational companies operating on a 10-year planning cycle.

Status as a foundation also colors the approach to corporate responsibility, where we adhere to "triple bottom line" reporting, which includes financial, social, and environmental performance metrics. We put that in place back in 2004, when we were the first major pharmaceutical company to do so. The commitment also shows in our record on executive compensation, where we have one of the lowest differential in this industry between our CEO's pay package and the pay of workers on the shop floor.

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