CFO Intelligence Magazine – Winter 2023
Ulrich Otte
Novo Nordisk U.S. CFO
For more than a decade, the U.S. division of Denmark-based Novo Nordisk steadily drove global growth with double-digit annual profit increases — until the global healthcare company hit a roadblock in 2016.
Anchored by the Plainsboro, N.J.-headquartered U.S. division, Novo Nordisk faced increased competition for its best-selling diabetes drug, and demands for bigger rebates from third-party PBMs, or pharmacy benefit managers who administer drug benefits for employers and health plans.
These issues contributed to a stumble as the company missed its own 2016 financial projections as well as analysts’ earnings estimates; with the company’s global sales growth continuing to flatline for several years. But Novo Nordisk’s response — and the way the company reoriented its focus away from a product that had driven profits for a century — illustrate how organizations need to be nimble and open to change in a fast-moving environment.
“We rely on predictability, and in calendar 2016 we missed it,” notes Novo Nordisk U.S. CFO Ulrich Otte, who joined the company in 2017, the same year that new Global CEO Lars Fruergaard Jorgensen came aboard. ”But we also went back and did a deep examination about what happened and learned from it.”
A NONTRADITIONAL RESPONSE
The traditional response would have included widespread cost-cutting measures, a big move for a division that accounts for nearly half of Novo Nordisk’s $19.5 billion global revenue. “But I reject across-the-board haircuts,” Otte adds, noting that approach not only potentially puts valuable personnel and projects at risk, but may also cover up hidden shortcomings within a company. “Broad-based cuts may be faster, but they’re not smarter. Instead, while we looked for efficiencies, we also wanted to focus on other ways to improve outcomes.”
Under his guidance, an Enterprise Strategy Team was developed, drawing professionals from a variety of departments that included Communications, Finance, and Analytics. “We also decided to reject the ‘one-year optimization’ model because it did not look far enough ahead,” he explains. “Instead we decided on a three-to-five year timeframe that took a number of what-if scenarios into consideration, with a mandate not to exclude anything.”