The Rise and Fall of the European Stock King: The Secret Reversal History of Weight Loss Miracle Drugs

In 1922, four researchers from Toronto successfully extracted insulin from animal pancreases, providing a treatment for diabetes.

Although insulin at that time could effectively lower human blood sugar, the product's purity was low as it was extracted from crushed animal pancreases, leading to side effects such as systemic itching and rashes, and in severe cases, anaphylactic shock.

To reduce the side effects of animal insulin products, leading insulin manufacturers such as Eli Lilly initiated a 60-year "purification" competition. In this competition, companies like Eli Lilly, Novo Nordisk, and Sanofi continuously invested, successfully reducing the contaminant level in insulin from the initial 50,000 ppm (parts per million) to 10 ppm by 1980.

This insulin "purification" competition came to an end in 1982. Genentech, a pioneer in genetic engineering technology, successfully produced recombinant human insulin using E. coli bacteria and subsequently licensed this technology to Eli Lilly. From then on, Eli Lilly was able to increase insulin concentration to 100%, indicating its imminent victory in this "century-long battle of insulin".

However, the story did not unfold as Eli Lilly expected. Instead, its "archenemy" emerged during this process - the current "European stock king" Novo Nordisk.

01 Eli Lilly: Trapped in "Continuity Thinking"

Most technological innovations follow a predetermined path, as seen in the early days of the insulin race where continuous improvement in purity was the core path of technological change.

For leading players like Eli Lilly, producing insulin products with higher purity could significantly reduce side effects and command higher product premiums. Through repeated technological iterations, Eli Lilly gradually accumulated a competitive advantage, hence its obsession with "purifying" insulin. In other words, the early competition in the insulin race continued to develop along the line of purity improvement.

Genentech's cloned human insulin effectively solved the problem of immune reactions caused by animal insulin, with almost no side effects. For diabetic patients at that time, this was a perfect product. However, this perfect product did not bring sufficient returns to Eli Lilly.

To industrialize the mass production of human insulin Humulin, Eli Lilly invested nearly $1 billion in the 1980s, hoping to monopolize the entire insulin market with this groundbreaking product. Therefore, Eli Lilly priced Humulin relatively low, only 25% higher than conventional animal insulin.

However, the sales data of this groundbreaking product were not satisfactory, and Eli Lilly even found it challenging to sell Humulin at a higher premium than animal insulin. Although human insulin eventually replaced animal insulin entirely, this "groundbreaking innovation" did not bring commercial success to Eli Lilly compared to its initial high investment.

The reason why Humulin struggled to command a premium lies in the solidification of "continuity thinking" In the early stage of industrial development, due to the extremely high proportion of pollutants in animal insulin, purity is the most concerning issue for diabetic patients. As long as manufacturers continue along this path of technological innovation, they can easily achieve commercial success.

However, there is a limit to "purifying" insulin, and as technology advances, the industry is getting closer to this limit. By 1980, the purity of insulin had increased to 10ppm, almost reaching 100%. At this point, Lilly's obsession with perfect insulin products was not wrong, but purity was no longer the core focus of insulin competition.

Although animal insulin still causes some diabetic patients to have immune reactions, the side effect rate has significantly decreased compared to the initial stage, and animal insulin can now meet the needs of most diabetic patients. Based on this, only a small percentage of patients who have immune reactions will choose the higher-priced human insulin, which in the eyes of most patients is more like an "IQ tax".

Being obsessed with "continuity thinking" and neglecting the main contradiction in insulin development is why Lilly's Humulin did not achieve the expected success at that time. The "primary nature" of industrial development is not static, but constantly changing with technological innovation.

02 Novo Nordisk: Overtaking in the Bend to Fill the Clinical Gap

Since Lilly underestimated the "primary nature" of insulin development in the 1980s, what was the core pain point for diabetic patients at that time? It was the lack of compliance with clinical needs.

At that time, although insulin could meet the glycemic control needs of most diabetic patients, daily insulin injections were still a complex task. Diabetic patients had to fill the syringe with a day's worth of insulin, expel air bubbles before each injection, and control the dosage carefully. This made a simple insulin injection often take several minutes.

Today, it may be difficult for people to perceive the pain of diabetic patients at that time. It was not just physical pain, but also the mental anguish of carefully injecting insulin every day. This subtle clinical need was accurately observed by the Danish company Novo Nordisk, so while Lilly was promoting human insulin comprehensively, Novo Nordisk (formerly Nordisk) was trying to compete in the market by designing a more convenient insulin pen.

In 1986, when Lilly's sales of human insulin fell short of expectations, Novo Nordisk successfully developed a new generation insulin pen - NovoPen. NovoPen was like a specially designed pen, containing several weeks' worth of insulin. When diabetic patients injected insulin, they only needed to press the injection button to complete the insulin injection within 10 seconds.

Image: NovoPen born in 1985, Source: Official Website

Unlike Lilly's struggle to support a 25% premium for Humulin, Novo Nordisk's NovoPen easily achieved a 30% sales premium per unit of insulin, directly leading to a significant increase in Novo Nordisk's market share of insulin.

With the success of NovoPen, Novo Nordisk acquired the Danish company Nordisk two years later and launched the world's first prefilled insulin pen NovoLet in 1989 Relying on the high convenience of NovoPen, the merged Novo Nordisk now occupies 54.4% of the global market share, surpassing Eli Lilly to become the global number one.

NovoPen is the first pot of gold dug by Novo Nordisk, which also laid the foundation for Novo Nordisk's subsequent development strategy of getting closer to clinical needs.

03 How Can Small Companies Beat Giants?

Compared to Eli Lilly, which successfully acquired Genentech's insulin, Novo is considered a small company. However, it was this small company that seized the opportunity of Eli Lilly's strategic mistakes, ultimately achieving a counterattack in market share.

Whether at the brand level, technology level, or capital level, Eli Lilly was the absolute leader in the insulin race at that time. Why would such a large company fail? This is actually inevitable.

In the early stages of industry development, as there were no products that could meet users' demands for functionality, the standard of industry competition was functionality, that is, the purity of insulin. However, when the purity of insulin reached a certain level, most mainstream insulins in the market could already meet users' demands, leading to a decrease in the competitive advantage of leading companies.

When product performance is sufficient, further improvements in performance will not bring the same competitiveness as before. Users' focus gradually shifts from functionality to convenience, cost-effectiveness, and other factors.

However, due to their long-standing industry-leading position, leading companies fell into the trap of prioritizing technology, ultimately leading them to invest more funds and energy into higher-performance technology routes. While such efforts may be effective at times, industries will eventually change, and large companies will eventually suffer significant losses due to betting on the wrong technology route. Players in the industry who are in a catching-up position are often more sensitive to these changes, which is why classic cases of weaker players defeating stronger ones often appear in the history of world business.

Eli Lilly is not the first large company to be overtaken, and it certainly won't be the last. Large companies inherently lack sensitivity to technological change route migration and are more inclined to stick to their previous successful strategies, which is known as path dependence.

Thirty years later, insulin is no longer the core battleground of the pharmaceutical industry, but Novo Nordisk, focusing on clinical unmet needs, can still find new demands for weight loss in GLP-1.

In the indication of GLP-1 for weight loss, Novo Nordisk also demonstrates pragmatism. After the long-acting GLP-1 semaglutide meets user needs, it shifts its focus to developing oral medications to improve compliance. On the other hand, Eli Lilly seems to still adhere to the perfectionist style of the past, pursuing higher weight loss data. While this has led to the current highest market value globally, there are still objective risks.

Only innovation can bring new opportunities, especially in the pharmaceutical industry where filling clinical gaps is crucial. Starting from unmet clinical needs, companies can truly capture opportunities in the industry's development process. However, many large companies are unwilling to listen to external voices and instead indulge in their own grand narratives.

All things have cycles, and the rise and fall are the laws of nature. For large companies to maintain their advantages, they must abandon their positioning as large companies and continue to explore the industry as explorers. For pharmaceutical companies, filling clinical gaps is crucial, whether through improving efficacy, technological iteration, or enhancing compliance