Novo Nordisk’s Woes Are Slimming Denmark’s Economic Growth

The success of Novo Nordisk, the drugmaker behind the blockbuster diabetes and weight-loss drug Ozempic, was more than just a source of national pride for Denmark. It was a substantial economic force.

Fueled by millions of American prescriptions for Novo Nordisk’s medicines, the Danish economy has outshined those of its European neighbors. The pharmaceutical industry’s exports kept the country out of a recession for two years.

But now, Novo Nordisk is retrenching and cutting jobs after a big profit warning — and it’s casting a shadow over Denmark’s economy.

“They are growing at a much slower pace,” said Jens Naervig Pedersen, an economist at Danske Bank. “And given their size, it’s something that means the Danish economy will grow at a slower pace.”

Large companies, particularly manufacturers, have long been the defining economic force in many towns and cities. The livelihoods of people in those communities could wax and wane along with that of a local factory. But it is rare for a single company to make such an imprint on a national economy.

The Danish pharmaceutical industry, which is dominated by Novo Nordisk, accounted for 11 percent of the economy’s growth by the end of last year, according to a measure of the economy by the nation’s statistics office, up from 4 percent in 2019. Hiring by Novo Nordisk also represented a fifth of employment growth in 2023, while it was the largest single contributor to corporate tax revenues.

Last month, after Novo Nordisk warned that its sales growth would slow in the second half of this year because of stiff competition, the Danish economy ministry slashed its growth forecast for 2025 to 1.4 percent, about half its previous forecast. Analysts at banks and other institutions have also lowered their forecasts. The central bank is expected to lower its projections for the economy this week.

Some of the forecast revisions are because the Danish economy is actually smaller than previously thought. The nation’s statistics office recently revised its figures for how much the economy has grown since 2021, shaving off more than 4 percentage points — a substantial downgrade.

But that has only exacerbated the importance of the pharmaceutical industry. While the rest of the economy showed little to no growth, pharma continued to expand.

Now, the cost-cutting at Novo Nordisk could dampen the perception of the overall health of Denmark’s economy.

After doubling its work force in Denmark to more than 34,000 employees in the past five years, Novo Nordisk said last week that it intended to cut about 5,000 jobs. Those layoffs make up just 0.15 percent of the country’s employment, but they could weigh on consumer confidence and the economy, said Mr. Pedersen, the Danske Bank economist who recently lowered his forecasts for the nation’s economic growth.

“Because the company is so large, many people know someone who works at Novo,” he said. “A lot of Danish households have a significant stock position in Novo Nordisk. So the downturn is felt.”

There is precedent for a country’s economy to take a hit when its largest company stumbles. Finland, for example, struggled after the decline of Nokia phones. But economists say the comparison to Finland is overblown. Novo Nordisk still expects its sales to grow and will continue to employ tens of thousands in Denmark while expanding its production facilities.

“We won’t get more jobs created in Novo Nordisk, at least not in short term, but then we see a clear sense that other sectors are starting to pick up again,” including the defense industry, said Jan Størup Nielsen, an economist at Nordea.

That creates economic demand that could compensate for job losses at Novo Nordisk.

At the same time, the Danish government has other levers to support the economy. The country has low debt levels, representing about 30 percent of the size of the economy, meaning lawmakers have room to shield households from economic pain. (The U.S. federal debt, by comparison, equals the size of the economy.)

With an election set to take place within the next year, the government has already cut taxes on electricity and on household items like coffee and cocoa.

The country is benefiting from low debt and investor trust in its institutions, said Rory Fennessy, an economist at Oxford Economics. “Denmark is a country where if it wants to spend money, it can,” he said. The country is business friendly and has a strong foundation, he added, but “a lot of uncertainty has really been thrust into the spotlight with the pharmaceutical side.”