What is the outlook for the Danish and Swedish life sciences sector and how could limited diversification impact growth prospects
What are the three future risk areas life science firms should be aware of in 2023
What can life science firms do to boost growth using scalable production, digitalization and recruitment.
What is the outlook for the Danish and Swedish life sciences sector and how could limited diversification impact growth prospects
What are the three future risk areas life science firms should be aware of in 2023
What can life science firms do to boost growth using scalable production, digitalization and recruitment.
The Nordic countries’ life sciences sector contributes a total of €18 billion to the Swedish and Danish economy. Compared to life sciences sectors across European Union countries, the Swedish and Danish life sciences sector makes up amongst the largest proportions of each economy’s GDP.
Whilst life sciences make up 1.2% of total EU member states GDP, the sector makes up 3.5% (€11 billion) of Denmark’s GDP and 1.4% (€7 billion) of Sweden’s GDP.
The Swedish and Danish life sciences sector makes up amongst the largest proportions of each economy's GDP
Fig 1: Contributions to economies’ GDP<sup>3</sup> of sectors within life sciences
3. Eurostat data 2020. NACE codes 21,266,325,7211. Data availability means 2019 data is used for the EU-27
The Nordic countries’ life sciences sector contributes a total of €18 billion to the Swedish and Danish economy. Compared to life sciences sectors across European Union countries, the Swedish and Danish life sciences sector makes up amongst the largest proportions of each economy’s GDP.
Whilst life sciences make up 1.2% of total EU member states GDP, the sector makes up 3.5% (€11 billion) of Denmark’s GDP and 1.4% (€7 billion) of Sweden’s GDP.
The Swedish and Danish life sciences sector makes up amongst the largest proportions of each economy's GDP
Fig 1: Contributions to economies’ GDP<sup>3</sup> of sectors within life sciences
3. Eurostat data 2020. NACE codes 21,266,325,7211. Data availability means 2019 data is used for the EU-27
The life sciences sector has promising long-run growth trends—increased purchasing power in developing economies; ageing populations; and increased interest in health in developed ones—means demand is expected to be strong. Rising global obesity rates (which are strongly related to diabetes) will be a growth area for Denmark in particular, as half of the world’s insulin is produced at Novo Nordisk’s plant in Kalundborg, Denmark. One market research firm predicts that the global insulin market is expected to grow at a compound annual growth rate (CAGR) of 5.9% from 2023 to 20304.
Focusing on the dominant pharmaceutical sector, the Nordic sector experienced strong growth between 2010 and 2019, with annual growth of 7.4%. This is double that of the German pharmaceutical sector in the same time period (which is the largest pharmaceuticals producer in the EU).
Fig 2: Annual growth in Nordic (Denmark and Sweden) pharmaceuticals in real terms (%)
The life sciences sector has promising long-run growth trends—increased purchasing power in developing economies; ageing populations; and increased interest in health in developed ones—means demand is expected to be strong. Rising global obesity rates (which are strongly related to diabetes) will be a growth area for Denmark in particular, as half of the world’s insulin is produced at Novo Nordisk’s plant in Kalundborg, Denmark. One market research firm predicts that the global insulin market is expected to grow at a compound annual growth rate (CAGR) of 5.9% from 2023 to 20304.
Focusing on the dominant pharmaceutical sector, the Nordic sector experienced strong growth between 2010 and 2019, with annual growth of 7.4%. This is double that of the German pharmaceutical sector in the same time period (which is the largest pharmaceuticals producer in the EU).
4. https://www.linkedin.com/pulse/insulin-market-predicted-surge-ahead-impressive-cagr-59-dhole
Fig 2: Annual growth in Nordic (Denmark and Sweden) pharmaceuticals in real terms (%)
Looking forward, we expect strong growth in the Nordic pharmaceutical sector in 2023. This is largely due to Novo Nordisk’s strong sales in the diabetes and anti-obesity medication Semaglutide, sold under the brand names Ozempic, Wegovy, and Rybelsus. This contributed to Danish pharmaceutical gross value added (GVA) being 66% higher in Q1 of 2023 than in Q1 of 2022. Output of Semaglutide is expected to be particularly elevated in 2023 as availability of the medications were constricted for much of 2022 due to high demand and supply chain issues limiting supply5.
The recent uptick in growth means our forecasts suggest that the Nordic pharmaceutical sector will expand by 31% in 2023. Given the large forecast jump in output we expect growth to contract slightly in 2024 (by 0.9%). We then expect output to return to growth in 2025 and 2026, (1.7% and 2.3% respectively).
However, given that one company makes up a large part of the Nordic pharmaceutical market, we caution that there is likely to be a significant degree of uncertainty in these forecasts. Future sales in Semaglutide will depend on other competitor drugs, future regulation, consumer sentiment, and the degree to which production can be scaled up.
5. https://www.novonordisk.com/content/dam/nncorp/global/en/investors/irmaterial/annual_report/2023/novo-nordisk-annual-report-2022.pdf
Looking forward, we expect strong growth in the Nordic pharmaceutical sector in 2023. This is largely due to Novo Nordisk’s strong sales in the diabetes and anti-obesity medication Semaglutide, sold under the brand names Ozempic, Wegovy, and Rybelsus. This contributed to Danish pharmaceutical gross value added (GVA) being 66% higher in Q1 of 2023 than in Q1 of 2022. Output of Semaglutide is expected to be particularly elevated in 2023 as availability of the medications were constricted for much of 2022 due to high demand and supply chain issues limiting supply5.
The recent uptick in growth means our forecasts suggest that the Nordic pharmaceutical sector will expand by 31% in 2023. Given the large forecast jump in output we expect growth to contract slightly in 2024 (by 0.9%). We then expect output to return to growth in 2025 and 2026, (1.7% and 2.3% respectively).
However, given that one company makes up a large part of the Nordic pharmaceutical market, we caution that there is likely to be a significant degree of uncertainty in these forecasts. Future sales in Semaglutide will depend on other competitor drugs, future regulation, consumer sentiment, and the degree to which production can be scaled up.
5. https://www.novonordisk.com/content/dam/nncorp/global/en/investors/irmaterial/annual_report/2023/novo-nordisk-annual-report-2022.pdf
In times of high demand, businesses need to be able to scale up production quickly. Outsourcing parts of the production process can help businesses handle short-term surges in demand. Spreading supply across production sites may also be beneficial; in the case of Novo Nordisk, shortages of Semagludtide arose due to regulators finding issues with manufacturing practices in a contractor manufacturer’s Belgian site6. Although a lower dependence on this site would have minimised the shortage, having multiple manufacturers can also bring problems. These include decreased negotiating power and economies of scale as well as challenges with quality control.
Life science companies in the region report that recruitment of skilled employees is increasingly difficult7. In 2022, the Danish government published a list of professions, for which it is looking for foreign workers to come to fill vacancies8. The list includes several professions in the field of life sciences. There is a risk that continued skills shortages will obstruct growth in the sector. Building stronger links with educational institutions could help to increase skill levels. Businesses could also work closely with universities to help ensure that the educational content is relevant for working in the industry.
There is a risk that continued skills shortages will obstruct growth in the sector.
Providing more opportunities for internships during educational training as well as offering traineeships where graduates can shift between companies could also help to increase knowledge and skills.
Life science firms should look to leverage many of the productivity boosting changes Covid-19 brought about. Shifting from in-person to decentralised trials enabled by tools such as telemedicine and wearable medical devices has reduced patient burden and reporting subjectivity9. Decentralised trials can boost productivity by reducing costs and clinical trial timelines and improving patient recruitment and retention.
6. i) https://www.novonordisk.com/content/nncorp/global/en/news-and-media/news-and-ir-materials/news-details.html?id=92023 ii) https://www.pharmaceutical-technology.com/comment/novo-nordisks-wegovy-supply-challenges/#:~:text=However%2C%20challenges%20remain%20in%20the,issues%20with%20good%20manufacturing%20practices
7. https://mva.org/wp-content/uploads/2022/05/20220518_Life_science_easter_denmark.pdf
8. https://www.schengenvisainfo.com/news/denmark-looking-for-foreign-workers-to-fill-in-these-jobs-in-2023/
9. https://www2.deloitte.com/content/dam/Deloitte/br/Documents/life-sciences-health-care/deloitte-life-sciences-outlook-2022.pdf
In times of high demand, businesses need to be able to scale up production quickly. Outsourcing parts of the production process can help businesses handle short-term surges in demand. Spreading supply across production sites may also be beneficial; in the case of Novo Nordisk, shortages of Semagludtide arose due to regulators finding issues with manufacturing practices in a contractor manufacturer’s Belgian site6. Although a lower dependence on this site would have minimised the shortage, having multiple manufacturers can also bring problems. These include decreased negotiating power and economies of scale as well as challenges with quality control.
Life science companies in the region report that recruitment of skilled employees is increasingly difficult7. In 2022, the Danish government published a list of professions, for which it is looking for foreign workers to come to fill vacancies8. The list includes several professions in the field of life sciences. There is a risk that continued skills shortages will obstruct growth in the sector. Building stronger links with educational institutions could help to increase skill levels. Businesses could also work closely with universities to help ensure that the educational content is relevant for working in the industry.
There is a risk that continued skills shortages will obstruct growth in the sector.
Providing more opportunities for internships during educational training as well as offering traineeships where graduates can shift between companies could also help to increase knowledge and skills.
Life science firms should look to leverage many of the productivity boosting changes Covid-19 brought about. Shifting from in-person to decentralised trials enabled by tools such as telemedicine and wearable medical devices has reduced patient burden and reporting subjectivity9. Decentralised trials can boost productivity by reducing costs and clinical trial timelines and improving patient recruitment and retention.
6. i) https://www.novonordisk.com/content/nncorp/global/en/news-and-media/news-and-ir-materials/news-details.html?id=92023 ii) https://www.pharmaceutical-technology.com/comment/novo-nordisks-wegovy-supply-challenges/#:~:text=However%2C%20challenges%20remain%20in%20the,issues%20with%20good%20manufacturing%20practices
7. https://mva.org/wp-content/uploads/2022/05/20220518_Life_science_easter_denmark.pdf
8. https://www.schengenvisainfo.com/news/denmark-looking-for-foreign-workers-to-fill-in-these-jobs-in-2023/
9. https://www2.deloitte.com/content/dam/Deloitte/br/Documents/life-sciences-health-care/deloitte-life-sciences-outlook-2022.pdf
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