On Tuesday, investors erased $70 billion from Novo Nordisk’s market value after the company, known for its weight loss drug Wegovy, issued a profit warning. This announcement came alongside the appointment of a new CEO as Novo faces heightened competition in the obesity medication sector.
Novo has appointed Magiar Mike Dustdal as its new CEO, hoping that his experience will help restore sales and reassure investors who are anxious about the company’s standing in the market for obesity drugs, especially given the situation with Danish pharmaceutical competitors.
Despite the leadership change, the stock market reaction was severe. Novo cut its sales growth forecast for 2025, lowering the estimates dramatically in several areas. Initially, projections were around 8%, but they plummeted to as low as 14%, and forecasts from the previous year dropped from 21% to just 8%. As a result, the stock fell nearly 30% before recovering slightly to around a 20% loss by early afternoon. This year, the stock has already declined by 44%.
Markus Manns, a portfolio manager at Union Investments and a shareholder in Novo, mentioned to Reuters that the challenges the company faces with Wegovy are more serious than just the presence of competing products.
Competing drugs are being custom-made from similar ingredients as Novo’s branded offerings. While U.S. law prohibits pharmacies from duplicating approved medications, it does allow for “compound interest” when patients need specialized doses or formulations.
In its latest statement, the company projected that both Wegovy and Ozempic, which are part of the GLP-1 diabetes market, would see a reduction in sales growth estimates for 2025, primarily due to lower expectations in the U.S. market.
After its rise to become Europe’s most valuable publicly traded company following the 2021 launch of Wegovy, Novo is now grappling with a new reality after the abrupt ousting of CEO Lars Fruergaard Jorgensen in May.
At its peak in June 2024, the company’s valuation reached $615 billion, but it has since faced declining stock prices amid investor concerns regarding its experimental drug pipeline and the challenges it faces in the U.S. market.
“The stocks have quite frankly been a disappointment for those who once held them in high regard,” stated Angelo Meda, portfolio manager at Banner Sim in Milan. “One of the biggest worries is the emergence of illegal channels siphoning off market share. It’s hard to measure, and recovery takes time.”
New CEO Insider
Dustdal, an Iranian-born Austrian citizen who was raised in the U.S., joined Novo in 1992. He is set to officially take on his new role on August 7, transitioning from his position as vice president of international business, where he previously led operations in the Middle East and Southeast Asia.
“There’s a need for urgency and a different approach,” Dustdal told investors and analysts in a phone call. “The timing of my appointment, following the recent guidance update, underscores the importance of our mission.”
Some investors and analysts believe Novo should have sought an American or someone with significant U.S. market experience for the CEO role, especially after Novo’s initial efforts in the U.S. this year fell short against Eli Lilly’s offerings.
Revitalizing sales in the U.S., where the company is most profitable, is seen as the new CEO’s immediate challenge. Novo introduced Wegovy about two and a half years before Eli Lilly’s Zepbound, but recently, Zepbound’s prescriptions have surpassed those of Wegovy, with over 100,000 prescriptions a week this year.
In May, Novo noted that many of the approximately 1 million U.S. patients using GLP-1 drugs were expected to transition to branded products following the FDA’s ban on complex copies of Wegovy that went into effect on May 22.
“Unfortunately, our recent market research indicates that this shift isn’t happening,” Chief Financial Officer Karsten Mank Knudsen said during a call with analysts on Tuesday, mentioning that over a million patients still rely on compound GLP-1 medications.
To address the issue of illegal compounding, Novo is working closely with the U.S. FDA, as noted by Chief David Moore during a phone call. “Formulation is a concern we need to tackle,” Moore emphasized.
