Novo Nordisk (Ozempic)

1. BGBen Gilbert0:00

   All right, first episode back. Let's see if I can do this sleep-deprived. [laughing]

2. DRDavid Rosenthal0:04

   [laughing] Oh, you and me both, Ben. [laughing] Oh.

3. SPSpeaker0:08

   Who got the truth? Is it you, is it you, is it you? Who got the truth now? Hmm. Is it you, is it you, is it you? Sit me down, say it straight, another story on the way. Who got the truth?

4. BGBen Gilbert0:25

   Welcome to Season Fourteen, Episode One of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

5. DRDavid Rosenthal0:33

   I'm David Rosenthal.

6. BGBen Gilbert0:34

   And we are your hosts. Today's episode is on the company behind the sensational diabetes and weight loss drugs, Ozempic and Wegovy. The company is Novo Nordisk. Now, when I first learned about Ozempic a few years ago, I thought, "Of course, this is gonna be amazing for a lot of people and could also completely destroy the market for insulin. Those insulin companies better watch out." But here is the fascinating thing, listeners: Novo Nordisk is the company behind insulin, or at least one of the few big ones. Now, you might say, "Well, that's okay, 'cause they're probably a big pharmaceutical company that's, you know, very diversified with lots of different drugs."

7. DRDavid Rosenthal1:14

   Nope.

8. BGBen Gilbert1:15

   No. Novo Nordisk is unique in that the vast majority of their revenue is concentrated in the category of metabolic health. They have been the insulin and diabetes company for the last one hundred years, and perhaps even more surprising, this pharma giant is unique in that they are owned and controlled by a non-profit foundation. The stats around weight, diabetes, and its impact on our society are staggering. There are thirty-eight million Americans with diabetes. That's one in ten people. Globally, that number is over five hundred million with the disease. Diabetes costs the US alone more than three hundred and twenty-seven billion dollars a year, and on the other side of things, in the weight category, around a billion people suffer from obesity worldwide. A billion, including forty percent of the US population. If you expand that from obesity to overweight, seventy-five percent of Americans are technically overweight. It is really hard to imagine a bigger market to go after, which is why Novo Nordisk has become Europe's largest company, surpassing even LVMH last year, David.

9. DRDavid Rosenthal2:21

   Yeah, it's wild. I mean, there are no other disease and drug categories besides diabetes and obesity, that this could be possible to have a company of this size, to have a pharma giant pretty much just focused on this one area. Like, this is the Hermès of the pharma industry.

10. BGBen Gilbert2:39

    Yeah. So why is today, in the early twenty twenties, the moment in human history for these new GLP-1 drugs? The crazy thing is, semaglutide, the molecule in Ozempic and Wegovy, was pioneered back by Novo Nordisk with the first trial in 2008 for Type 2 diabetes treatment, and it was built on research started in the early nineties. But here we are in 2023, almost three decades later, talking about it as a weight loss drug that sort of magically appeared out of nowhere, or that's at least the public perception of it. Incredibly, the fact that GLP-1 drugs could be used to reduce food intake was actually discovered way back in the mid-nineties, in the first sort of scientific publication about it, but only in 2021 did we finish the clinical trials that truly show how effective it can be.

11. DRDavid Rosenthal3:28

    And as we'll see, that's just the tip of the iceberg. I mean, this company is a hundred years old. The history goes way back and is way more interesting than I think just about anybody knows.

12. BGBen Gilbert3:38

    Yep. Pharmaceuticals is, without a doubt, the most complex industry that we have ever studied. So to fully understand Novo Nordisk, we need to go back to a simpler time before the Food and Drug Administration, before all this industry consolidation and healthcare oligopolies, before there were treatments for everything we take for granted today: antibiotics, vaccines for polio, tetanus, measles, mumps, you name it. That is where we will start our story. If you wanna know every time an episode drops, you can sign up at acquired.fm/email. These will also contain hints at what the next episode will be, and follow-up facts from previous episodes when we learn new information. Come talk about this episode with us after listening at acquired.fm/slack. And if you want more from David and I, you should check out our second show, ACQ2, where we interview founders, investors, and experts, often as follow-ups to the topics on these episodes. Before we dive in, we wanna briefly share that our presenting sponsor this season, which we are so pumped about, is J.P. Morgan, specifically their incredible payments business.

13. DRDavid Rosenthal4:39

    Yeah. We'll be talking about them in depth later in the episode, but we've known J.P. Morgan for a long time. We both personally bank with them, as does Acquired, but we really uncovered the breadth of J.P. Morgan Payments as we went deep into our industry research for our Visa episode last year. Just like how we say here on Acquired that every company has a story, every company's story is powered by payments, and J.P. Morgan Payments turns out to be a part of so many of our Acquired companies' journeys. And it's not just the Fortune five hundred, they're also helping companies grow from seed to IPO and beyond.

14. BGBen Gilbert5:10

    Yep. We're pumped to explore payments through all these different industries this season through both a technology innovation lens, but also a business model innovation lens. Much more ahead. So with that, this show is not investment advice. Dave and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only. David, where are we starting our story?

15. DRDavid Rosenthal5:29

    Well, we start in 1921, over a hundred years ago, in Toronto, Canada, with the discovery and extraction of the pancreatic hormone insulin by a laboratory group at the University of Toronto Medical School. Insulin, of course, as most of you know, regulates the absorption of glucose from the blood into the body, and it's the main anabolic hormone in most, if not all, animals in the world. Insufficient insulin production in the body, of course, leads to the disease diabetes.... So this group, if you could call it that, at the University of Toronto, is comprised of the physician Frederick Banting and the medical student, his assistant, Charles Best, along with a chemist and the head of the laboratory there, and assistant medical school dean, John MacLeod. Now, there's a whole bunch of controversy around who actually deserves credit for the discovery of insulin. The historical consensus at this point now being that it really was Banting and Best who did all the work. But nonetheless, two years later, when the Nobel Committee awards them the 1923 Nobel Prize in Physiology or Medicine for the discovery of insulin, it is Banting and MacLeod who get the award, not Best. This will come back up in a minute.

16. BGBen Gilbert6:56

    Yeah, and to set some context for the time period here, nineteen twenty-one, the public is not aware of what insulin is. The public is, however, aware of what type One diabetes is. This is the juvenile form of diabetes. Only five percent of diabetes sufferers have type One today, but back then, this was the dominant form of diabetes, and it was families whose kids had a death sentence, and there was basically nothing that could be done. And there were lots of rumors of people trying to figure out what substances, you know, you could inject or eat or anything to cure this sort of mysterious, horrible way to die. And people were so convinced in the late teens and early twenties that scientists were on the verge of a breakthrough, that the common wisdom was to go on a diet of, like, two to five hundred calories a day and starve yourself so that you could live long enough, even though you had a terrible quality of life, you could live the months or couple of years long enough when the treatment did arrive to finally get it.

17. DRDavid Rosenthal8:01

    I mean, we, I can't overstate how important this was and how terrible, awful diabetes was. I mean, it was truly a death sentence. That treatment that you were referring to, that was the official American and globally accepted treatment for diabetes. It was literally called the starvation diet, and it was just attempt to prolong your life as long as possible, but, like, you are going to die unless a treatment is found. So, you know, when we say that this group won the Nobel Prize in nineteen twenty-three, this isn't just, like, a Nobel Prize. This is one of, if not the most important advance in, like, all of modern medicine that they're discovering here.

18. BGBen Gilbert8:41

    I mean, we're just not that many decades after snake oil salesmen, patent medicine. We talked on the Standard Oil episode about John D. Rockefeller's father literally selling snake oil, and that's just barely in the rearview mirror. This is one of the earliest breakthroughs in modern science. We were still years away from antibiotics and certainly decades away from the popularization of antibiotics as a treatment. So this was the big breakthrough.

19. DRDavid Rosenthal9:07

    Yep. All right, so what did Banting and Best do? So scientists had known, even going back to the eighteen hundreds, that diabetes was caused by the misfunctioning of some type of hormone that was created in the pancreas. But until Toronto, nobody had been able to actually isolate what that hormone was, let alone extract it.

20. BGBen Gilbert9:29

    And to put a finer point on it, Banting and Best didn't even know what the hormone was. Even when they did figure out what to extract, they thought it was sort of this soup of a bunch of different chemicals mixed together. They wouldn't figure out for years and years and years, "Oh, this is, like, one very pure, specific hormone that we are isolating here."

21. DRDavid Rosenthal9:45

    So by experimenting with dogs and dog pancreases, they're able to extract something [chuckles] that comes to be known as insulin, and not only extract it, they then experiment with it and inject it into human diabetes patients who are at, like, severe end-of-life stages. And miracle, like, the human body is able to use this extract from dog pancreases, and these patients have, like, miraculous recoveries.

22. BGBen Gilbert10:16

    Yeah. I spent a bunch of time reading this book, Breakthrough by Thea Cooper and Arthur Ainsberg, and they go way into this. Basically, this team was the first one to figure out you could target the pancreatic islets and isolate the extracts in a relatively pure form, and, you know, pure by their standards, not certainly by today's standards, but you're right, totally crazy extracting from these dogs and injecting in humans in extremely limited quantities. Once they figured it out, it was still hard to then go from there to, like, getting it to people because they're like: Well, okay, we did this thing that kind of worked once from, like, one dog into one person. So, um, where do we go from here?

23. DRDavid Rosenthal10:53

    And importantly, this new insulin substance, while it is a miracle, it's not a cure. [chuckles] Injecting patients with it doesn't magically, like, restart production of insulin in their own pancreases or cure the disease. It only works until your body uses it all up, which is pretty quickly. So these diabetes patients, you know, they finally have a new lease on life, but it's kinda also just that, like a lease. In order for them to survive, they need to regularly inject an appropriate amount of insulin, you know, and by regular basis, especially in these early days, that's like every couple hours.

24. BGBen Gilbert11:33

    And you can imagine the incredible high-wire act in the early days, where they've extracted from literally one dog. They've kind of written down the process. Strangely enough, somewhere along the way, the process was forgotten. Someone else had to replicate it, and then they took his notes, combined them with the original researchers, and then figured out a path forward. I mean, we discovered the process for refining insulin enough to put it into humans and then lost it and then found it again. This was the state of medical science, and so you have people ringing off the hook, newspapers reporting, "The breakthrough is here! The breakthrough is here!" And they've got, like, you know, single digits or dozens of vials of usable insulin, each of which need to be injected into a single patient every few hours in Toronto. So there's not enough to go around. The path forward is super unclear, and this is foreshadowing a little bit, but the era that we're in here in nineteen twenty-one, there is a firewall between industry and medical science, and it was perceived to be unethical to make money on-... taking your medical breakthroughs and sort of turning them into companies. And so there's this extreme culture at the University of Toronto around, we have to protect anyone from making too much money off this thing, so we've gotta be really careful and potentially even slow down its development and be really thoughtful about how we distribute it to the world so that nobody takes it and makes too much money.

25. DRDavid Rosenthal12:55

    Yeah, Banting and Best and Macleod aren't gonna go, you know-- today, they would go, like, start a company, [chuckles] you know, around this. Like, that's not gonna happen back then. But all of a sudden, the world needs a lot of this animal insulin, and in a supply chain that can't go down, because once you start patients on this, they need it forever. So what the University of Toronto does do is they license production and development rights to a large American drug company based in Indiana, Eli Lilly, and they give Eli Lilly a one-year exclusive development license to try and mass produce this substance. And again, like you said, this is, like, a big step for the University of Toronto to do this, but the need in the world is so great that they're willing to work with industry here.

26. BGBen Gilbert13:44

    You literally have presidents and secretaries of state trying to call in favors, and successfully calling in favors, to get access to the limited vials that the University of Toronto has.

27. DRDavid Rosenthal13:54

    Yeah. Wasn't Elizabeth Hughes, one of these famous first patients, the daughter of the Secretary of State of the US, right?

28. BGBen Gilbert13:59

    Charles Evans Hughes. Yeah.

29. DRDavid Rosenthal14:01

    Yeah. Wild. So it's obviously not practical or maybe not ethical, that's [chuckles] beyond the scope of this podcast, to use dog pancreases for scaling mass production here. But it turns out there actually is an abundant, ready supply of animal pancreases that happen to be just sort of lying around in the American heartland and just about every human food production center in the world, and that is cow and pig pancreases from, you know, all the meat that we eat.

30. BGBen Gilbert14:32

    Indiana's got a lot of cow farmers, and so the clever, really start-up Eli Lilly... I mean, the company had been around for a while, but this idea of taking on real R&D risk was sort of a new concept. So the sort of start-up Eli Lilly is going around hiring salespeople to bang down the door of slaughterhouses all over Indiana and say, "Hey, I know your waste product includes pancreases. Do you think you could ship those to us?"

Episode duration: 3:45:25