Novo Nordisk’s decision to stop the development of levormeloxifene has not weakened its ambition to remain an independent company

Stopping a development project is always a tough decision. Particularly when it is a project that is seen, both by the company and the outside world, as a potential source of sales and earnings growth and the key to increased market shares in a fast-growing market.

So it will come as no surprise that the stock market and the rest of the world reacted to Novo Nordisk’s decision to stop development of levormeloxifene - the company’s in-licensed agent under development for the treatment and prevention of osteoporosis.

Disappointment - not a threat
It is a fact of life in the research-based pharmaceutical industry that not every project that is initiated ends up as a marketable product. It is always disappointing to abandon a development project and the further down the line the process has gone, the greater is the disappointment. But it is far from being the threat to the company’s survival and growth as an independent concern that you might believe judging from the reaction in the days following the announcement of the decision.

Mads Øvlisen, president and CEO: "The truth is that we have abandoned a development project which looked very promising in the early phases but which later proved to have too many side effects. We decided to shut it down now rather than later for the sake of the patients - because we are a responsible company. And that’s how we want to stay - it’s part of our vision for the future.

The strategy launched in December 1994 remains unchanged. (See box)

"It’s also true that since we launched our new strategy in December 1994, we have met almost all the very ambitious goals for earnings growth that we set ourselves. And we intend to go on doing that - even without levormeloxifene. It will be more difficult, of course, but we have many strong products, and new ones on the way, and I’m convinced we will make it."

Shares under pressure
Another aspect of the corporate vision is to keep Novo Nordisk’s stakeholders informed about everything with openness and honesty. "We lived up to that promise throughout the project," says Mads Øvlisen. "We issued updates on that as well as all our other development projects and despite the fall in share prices, you must bear in mind that if one looks at the development of Novo Nordisk shares over the last three years, we are a very good company to invest in. And we intend to remain so by achieving our goals for growth.

"In Vision21, we wrote that we would grow as an independent company. As long as we do just as well as our competitors, we will be able to attain the goals of that vision. But that doesn’t mean we have to isolate ourselves.

"We have to work constantly on creating new alliances and finding partners who can strengthen our development potential and existing business. Novo Nordisk itself is a text book example of the advantages an offensive alliance can give, and we hope that the alliances with Schering-Plough in the field of Diabetes Care in the US and Aradigm in the development of pulmonary insulin will be equally good alliances. The important thing is that we take an active part at the negotiating table when the decisions are made."

The strategy from 1994 Focus on: - Diabetes Care - Women’s Health Care (HRT) - Growth Disorders - Industrial Enzymes Seek strategic alliance partners, collaboration agreements etc in core business areas ‘Streamline’ R&D project portfolio and significantly reduce development times Find partners for - or divest - other businesses (‘non-core’) Adjust organisation, structure and staff and service functions to the focused business strategy

Divestiture is not an option
Novo Nordisk has no plans to change the core areas of the company and will thus continue to focus on the four areas of Diabetes Care, Women’s Health Care, Growth Disorders and Industrial Enzymes. However, management constantly keeps an eye on the structure to ensure that it suits the needs of the company at any time, including the need for establishing independent companies. That is precisely how NNE (Novo Nordisk Engineering) became a limited company, and with effect from 1 January, we will see the formation of NNIT A/S (Novo Nordisk IT) and NNS A/S (Novo Nordisk Servicepartner). But whatever the legal structure, our common values and visions remain the same.

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