NOVO INDUSTRI A/S - Company Profile, Information, Business Description, History, Background Information on NOVO INDUSTRI A/S



Novo Alle, Bagsvaerd
Denmark
2880

History of NOVO INDUSTRI A/S

Novo Industri produces approximately one-third of the world's supply of insulin and one-half of its supply of industrial enzymes. Although the Danish company is engaged in a variety of pharmaceutical and chemical activities, the production of insulin and enzymes remain the core of Novo's diverse enterprises. The company's current international stature evolved out of refining long-established skills and acquiring expertise within these specific fields.

August Krogh, a Danish physiologist and Nobel prize recipient, informed his colleagues of innovative drug research taking place in Toronto. There scientists were using pancreas extracts as a treatment for diabetes. Inspired by Krogh's enthusiasm, a number of Danes engaged in further investigation of this revolutionary hormone called insulin. Among these early converts were Harald Pedersen, a mechanical engineer, and his brother Thorvald, a pharmacist. Together they established a rudimentary production facility in the basement of Harald's home in Copenhagen. In 1925, just four years after the discovery of insulin, the Pedersen brothers were producing a stable, commercially viable, solution called "Insulin Novo."

By 1931 production demands required the Pedersen's to leave their cellar and rent space in a former dairy factory. Eventually the brothers purchased the building along with property surrounding the plant. Growing in just 10 years from a fledgling basement operation into a large scale enterprise, the company sold insulin in 40 countries. Pancreas from oxen, calves and swine were procured from slaughterhouses across Europe and transported to Novo first by refrigerated car, then by railway van, and finally by lorries. To satisfy Novo's growing need for space Arne Jacobsen, the renowned Danish architect, was contracted to design modern factories.

Research and development remained a priority from the very beginning of the company's history. Profits from insulin sales were reinvested to fund the company's laboratories. Novo opened the Hvidore Hospital for the exclusive treatment of diabetic patients and as additional facility for investigating the uses of insulin. Yet it was not until Knud Hallas-Moller joined Novo in 1937, immediately after graduating in pharmacy, that the company's research activities accelerated. As head of a new research team comprised mostly of former classmates, Hallas' first project involved investigating methods of improving insulin yields and prolonging its effectiveness.

The result of Hallas' years of study became the foundation for Novo's Lente series of insulins. Based on his discovery that auxiliary substances were not necessary to produce sustained effects, at present the Lente series remains one of the most widely used insulin preparations around the world. Hallas' research garnered him a doctorate from the University of Copenhagen. Later, Hallas received an honorary doctorate from the University of Toronto where insulin was first discovered. In 1977 he received the H.C. Orsted Gold Medal for his significant scientific contribution and in 1981, the year he retired as president to become chairman of the board, Hallas was elevated to the First Class of the order of Knights of the Dannebrog. Hallas met his wife, Gudrun Hallas-Moller, while still working as a researcher; she is the daughter of founder Harald Pedersen.

An additional product line was added to Novo's operations in 1938, thus expanding the company's activities outside the exclusive task of manufacturing insulin. Sterilizing and autoclaving sheep guts produced a versatile surgical thread called Catgut. The popularity of this product kept Novo Facilities occupied over the course of many years; however, in the 1950's when new methods of suturing wounds supplanted the need for Catgut, production was abandoned.

Novo introduced another product during this time that marked a significant step in the direction of developing biochemicals. When the company began competing with the tanning industry for animal glands during World War II, Novo decided to extract both insulin and trypsin, an enzyme necessary for batting hides. The combined manufacture of these two products complemented each other well; once insulin was extracted, trypsin could be produced from the gland residues. From the first production of trypsin in the dark cellar of the insulin factory, Novo proceeded to manufacture a wide range of enzymes which eventually led to its becoming one of the world's leading manufacturers of enzymes.

At the same time Novo pursued this early enzyme production, the company possessed basic knowledge of fermentation techniques. This knowledge soon proved useful both for the future manufacture of enzymes and the immediate need for penicillin. During World War II there was increased pressure on the scientific community to produce mass quantities of the recently isolated bacterial combatant. Novo, eager to contribute, ordered its employees to examine anything from old ski boots and jam jars in order to find the correct fungi. While yields varied as Novo attempted to improve its technology, it was not until Hallas' postwar visit to the U.S. that the company finally perfected production.



Observing the superior qualities of crystalline penicillin developed at Cornell University, Hallas encouraged Novo to develop its own method of crystallization. By 1947 Novo researchers obtained the desired results and the company became one of the first to commercially produce this stable form of penicillin. With this success Novo proceeded to extend its operations to include the manufacture of second generation antibiotics. Today these pharmaceuticals remain indispensible for the treatment of patients with penicillin allergies and for fighting bacteria resistant to penicillin.

The following decade saw the introduction of Heparin Novo, a notable drug used in the treatment of blood clots. As trypsin is a necessary ingredient in the manufacture of this new product, heparin fitted well with Novo's established activities. Using organ tissue from oxen or pigs as raw materials, Novo packaged heparin in small disposable syringes enabling doctors to closely monitor the dosage.

In addition to the manufacture of heparin, the 1950's brought significant structural changes to the growing company. Under Hallas' encouragement, the Pedersen brothers created the Novo Foundation as a receptacle for all Novo's non-negotiable shares. Prior to this decision, control of the company remained in the hands of the founding family. As the Pedersens neared retirement, a solution was sought to protect Novo's future as an independent company. By establishing a foundation with a voting majority, the company acquired an important defense against hostile takeovers as well as a source for contributing to humanitarian projects.

By acquiring expertise in fermentation technology through the manufacture of penicillin, Novo stood well prepared to initiate enzyme production by fermentation of micro-organisms. The first product of this technology was amylase, an industrial enzyme used in the manufacture of textiles. Over the next 15 years a number of enzymes emerged from Novo's laboratories that no longer required animal organs for raw materials. The most successful of these products was Alcalase, an enzyme used in detergents. In the mid-1960's these types of enzymes became popular around the world and propelled Novo to the forefront of the industry.

A major setback in 1970, however, caused enzyme sales to drop precipitously. A campaign in the U.S. to expose alleged health hazards for users of enzymes brought Novo under harsh criticism. After just having completed three new fermentation plants, the company was forced to lay off 400 workers as millions of kroner were lost in sales. Only when the National Academy of Sciences dismissed evidence of health risks did enzyme sales in the U.S. regain some of its lost momentum. In 1979 Novo completed an enzyme factory in North Carolina for the production of fructose sugar. Increasing demand for this product resulted in the recent expansion of this facility.

In 1955 Novo purchased a piece of land in Bagsvaerd, an area north of Copenhagen. Over the course of the next several years Novo built an array of facilities on this site and Bagsvaerd became the center of administrative and production activities. Also during this period several new lines of pharmaceuticals augmented Novo's traditional businesses. These included steroid products for gynecological applications and Glucagon, a diagnostic aid.

Despite these successful additions, the improvement of insulin products remained a company priority. In a major scientific breakthrough, Novo introduced Monocomponent insulins, the purest preparation of insulin available. For the first time in the treatment of diabetes insulin could be administered without the presence of contaminants found in other preparations. Other improvements included the basal/bolus concept of treatment whereby a diabetic could simulate the natural patterns of short- and long-acting insulin. The compact NovoPen, an injection device based on this concept, allows diabetics more freedom in their lifestyles.

Novo's most recent innovation in insulin products involved the 1982 introduction of the first commercially produced human insulins. Aware that porcine insulin differs from human insulin by only one amino acid, Novo discovered a chemical process to transform porcine insulin into an identical copy of that found in the human body. Today, Novo's industry competitors have successfully developed human insulin produced through genetic engineering. In response to this and other technological developments in the industry, Novo organized its own genetic laboratory to manufacture both enzymes and hormones.

The need for capital to support Novo's growth over the past years resulted in the company's stock being listed first on the Copenhagen and later on the London and New York exchanges. In 1975, to celebrate Novo's 50th anniversary, company employees were allowed the opportunity to become co-owners through the purchase of stock at nominal value. Some 90% of Novo's employees are shareholders. While Novo's stock presently remains an attractive investment, recent fluctuations in exchange rates caused earnings per share to decline between 1984 and 1986. Nevertheless, sales for human insulin more than doubled during the same time period.

Novo factories now operate in the U.S., Japan, France, South Africa, and Switzerland with plans underway to construct new facilities around the world. In 1981 a jointly owned company was initiated with E.R. Squibb & Sons, a large U.S. pharmaceutical concern. Research and development, always a company priority, is funded through the annual reinvestment of an average 10% of sales. In addition to insulin research, the company is currently engaged in developing a broad range of innovative applications for enzymes. These applications include such diverse areas as pollution control, fuel alcohol projects, and food protein sources.

Principal Subsidiaries: Novo industries (Pharmaceuticals) (Pty.) Ltd.; Novo Industri A/S; Novo Laboratories, Inc.; Novo Biochemical Industries, Inc.; Novo Industri Oy; Novo Farmaka A/S; Novo Industri B.V.; Novo Laboratories Pty. Ltd.; CSL-Novo Pty. Ltd.; Novo Industrie Enzymes S.A.; Novo Diagnostic Systems A/S; Novo Industri A/S Ltd.; Novo Laboratories Ltd.; Novo Enzyme Products Limited.; Novo Laboratories Ltd.; Novo Industri Limited; Alfred Jorgensen Laboratory of Fermentation Ltd.; Hermedico A/S. The company also has subsidiaries in the following countries: Brazil, France, Ireland, Italy, Greece, Japan, Netherlands, Portugal, Spain, Sweden, United Kingdom and West Germany.

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