Steen Riisgaard, Enzyme Business
The market for industrial enzymes has undergone significant changes over the last two years. In this period we have been dealing with two main issues: the shake-out in the market and productivity improvements, especially in production.
During the shake-out we have managed to keep our market share while at the same time improving production productivity and filling up our R&D pipeline. Today, in 1997, we see a new market situation emerging. A market situation which is very much to our advantage. The scene is set for a more profitable future. Novo Nordisk has the products, the pipeline, the intellectual property and the major part of the market.
Slide 27 - Major Events in 1996
1996 was an exiting year for the Enzyme Business. A clearer market picture has appeared within the Technical Enzyme market with the completion of Genencor’s acquisition of Solvay’s enzyme business and with Showa Denko’s decision to leave the field and sell off patents and know-how to Novo Nordisk.
In total, three important competitors have disappeared within the last two years leaving a completely new market situation.
Novo Nordisk is the only producer present in all three market segments; technical enzymes, food enzymes and feed enzymes. This also implies that Novo Nordisk is the only company to leverage its technology across the three segments.
Slide 28 - Global Market for Industrial Enzymes 1996
A significant advantage and at Novo Nordisk, a proven way of success for development of new industrial enzymes.
Slide 29 - Industrial Enzyme Producers - Estimated Market Share (1996)
Among the industrial enzyme producers, Novo Nordisk is by far the largest player. Our total estimated market share in 1996 was 43%. This is a decrease of 3%-points compared to 1995 which, however, is mainly due to new market data regarding the total size of the enzyme market and only to a very limited extent due to loss of market share. When calculating the total industrial enzyme market, we include rennet enzymes even though Novo Nordisk is no longer active in this segment after the divestiture in 1995. If only segments where Novo Nordisk is active are included, Novo Nordisk holds an estimated 48% overall market share.
Slide 30 - Enzyme Business - Sales Development 1992-1996
Total sales for the Enzyme Business increased 11% from DKK 3,388 million in 1995 to DKK 3,745 million in 1996. This growth was a result of a healthy volume growth of 9% and a favorable currency impact of 2%, mainly due to the appreciation of the USD in 1996.
Most important, prices have remained stable. As you can see, 1996 is the first in five years without price decreases.
By far the largest market segment is the Technical Enzyme market.
The Technical Enzyme segment mainly covers enzymes for the Detergent and Textile Industries. Novo Nordisk’s sales to these industries represent more than 70% of total Enzyme Business sales.
The changes in the market place have left only two major players in the Technical Enzyme segment. As for the overall market for industrial enzymes, Novo Nordisk is the biggest player.
This segment traditionally has been very competitive. Products were fairly standardised and price was used as a competitive parameter to gain market share. However, the characteristics of this market have changed rapidly over the last years.
Slide 31 - Technical Enzyme Market
In particular, introduction of new, innovative proprietary technologies and products has made the price parameter less important. And, in any event it is clear from the disappearance of three companies that prices had become unrealistically low.
We are excited about these changes, not least since we do indeed have a strong pipeline of innovative new products for the Technical Enzyme market. All of these have strong proprietary positions. Also, we do have reasonable hopes for prices to be stable or even increase.
In the Food and Feed Enzymes segments, proprietary protection is becoming increasingly important and, as mentioned by Bruce Carter in his presentation, we have implemented an aggressive patent strategy to secure exclusivity for future Novo Nordisk products.
Low cost production is crucial to profitability in the market for industrial enzymes. We have had several business process re-engineering projects ongoing in the production area in 1996 resulting in significant productivity improvements. We recognised that we can only produce at low cost in large-scale production facilities and this was the reason for closing down our small Japanese production plant during 1996.
Our production strategy is to have large scale production at three major sites; in Denmark, the US and in China where we are in the process of establishing a major facility. The China plant will be ready to support our sales in Asia Pacific in 1998. Novo Nordisk’s sales in China are growing according to expectations thereby supporting our decision to make China the third strategic production site.
We also continue to be excited about our R&D pipeline which we believe is the strongest R&D pipeline we have ever had. In 1996, Novo Nordisk introduced nine new products and a large number of improved formulations and substitution products. We intend to introduce 30-40 new products within the 1996 to 1998 period.
Slide 32 - Enzyme Business. R&D Pipeline - Selected Projects
In 1997, this includes new products for the Detergent, Textile and the Food functionality Industries. Among these, two new products for denim preparation, one new product for household detergents and a new mixture of protein degrading enzymes for production of soy sauce and flavor bases.
We expect the market for industrial enzymes to grow in volume by 10-15% on average over the next five years. New products and applications are expected to increase the market size in the developed countries. And economic growth in the developing countries will also significantly contribute to the overall growth.
Novo Nordisk is well equipped to take advantage of these growth opportunities. Our unique pipeline will contribute to increasing the market size in the developed world. And our sales and technical support presence in the developing countries is second to none.
In summary, we are very confident that our enzyme business is rebounding, not at least due to the new market situation with only two main competitors in our main industry segment.
Prices are stable.
Productivity is constantly improving.
And we have the pipeline and the global presence to keep our market share of approximately 45% in a growing market.
With these words I will give the word back to Kurt Anker Nielsen.
