Fat Loss Drug War for Markets
The pioneering Danish drugmaker was once the most valuable company in Europe, but
analysts say a number of missteps reversed its fortunes.
Novo
Nordisk’s Ozempic Boom Turns to Bust
Once Europe’s most valuable
company, Novo Nordisk is now struggling with market share loss, investor skepticism, and fierce competition from Eli Lilly.
The Rise
·
Ozempic & Wegovy (semaglutide)
transformed Novo from an insulin-focused firm to a global obesity-drug leader.
·
Massive cultural popularity and celebrity
endorsements fueled demand; $10B in Ozempic sales in the first half of 2025 (70% from U.S.).
The Fall
·
Stock Crash: Down over 50% this year; $70B
market value wiped out in one day after cutting forecasts.
·
Leadership Change: Longtime CEO Lars Fruergaard
Jorgensen replaced by Maziar Mike Doustdar
amid pressure from the controlling foundation.
·
Forecast: Growth slowdown in second half
of 2025.
Key
Challenges
1.
Cheap Copycats: FDA lifted shortage designation,
but over 1M Americans still use compounded GLP-1 drugs. Novo has filed lawsuits
but struggles to curb the practice.
2.
Eli Lilly Competition:
o
Mounjaro/Zepbound (tirzepatide)
outperforms Wegovy in weight-loss efficacy and
patient preference.
o
Faster rollout of cheaper formats and
direct-to-consumer sales.
3.
Pipeline Lag: Novo’s
oral pill less effective than injections; Lilly’s pill (orforglipron)
shows strong results, though slightly below expectations.
4.
Market Concerns: Potential overestimation of
weight-loss drug market; U.S. political pressure for lower drug prices and
tariffs on imports.
Outlook
·
New CEO seen as fast-moving, but analysts doubt a
quick turnaround.
·
Short-term market sentiment favors
Eli Lilly, whose product is considered better.
·
Novo’s
long-term prospects hinge on defending market share, accelerating pipeline, and
resolving copycat threat.
For
years, there was no stopping Novo Nordisk, the Danish drugmaker
behind Ozempic. Its diabetes drug became a cultural phenomenon
for its ability to induce drastic weight loss while also reducing the risk of
heart attacks and other serious diseases in people with obesity. Its potential to
transform the health care industry made it a darling of the stock market, surging
to become the most valuable company in Europe.
Then,
suddenly, its fortunes took a turn.
Novo
Nordisk’s share price has plummeted more than 50 percent this year, pushing it out
of the top ten list of Europe’s most valuable companies. The company bewildered
analysts in May when it abruptly said it would replace its chief executive, and
it has seemed unable to keep ahead of competition from the American drugmaker Eli Lilly and the prevalence of cheap copycat versions.
“The
market’s got no patience for Novo,” said Gareth Powell, the head of health care
at Polar Capital, a fund manager. “Sentiment is absolutely dire.”
It
has been a stunning reversal for the company behind a drug that physicians once
called a game changer. On Wednesday, Novo Nordisk reported $24 billion in
global sales in the first six months of the year, but reiterated that it expects
growth to slow in the rest of the year, which it first flagged in a profit
warning last week. The company’s stock tumbled more, as analysts and investors expressed
doubts about whether there was much the company could do to revive its prospects
in the short term.
Novo
Nordisk is “a company with incredible history and capabilities, and they’ve got
a pipeline,” Mr. Powell said. “It’s just the market’s putting zero value on it.”
The Ozempic
boom opens a ‘can of worms’
Novo
Nordisk spent nearly a century in relative obscurity, known mostly to diabetes patients
and physicians as the producer of half the world’s insulin. That changed with Ozempic, the brand name for semaglutide,
Novo Nordisk’s synthetic version of a hormone known as glucagon-like peptide 1,
or GLP-1, which helps the body regulate blood sugar levels.
Ozempic, which came onto the market in late 2017,
led to substantial weight loss and quickly attracted cultural cachet, not least
because of its use among celebrities. TikTok videos documenting
people’s journey with Ozempic attracted millions of views.
Analysts predicted that it could tap into an enormous market, since one billion
people in the world are considered obese. In the first half of the year, Novo Nordisk
made $10 billion in sales from Ozempic, of which 70 percent
was in the United States.
For
a company that had been focused on the steady business of selling insulin, the popularity
of Ozempic took its executives by surprise. In 2021, they
started selling Wegovy, semaglutide
marketed specifically for weight loss, but demand was so high that the company struggled
to meet it.
An F.D.A. decision opens
the door for copycats
In
2022, semaglutide landed on the Food and Drug Administration’s
shortage list, which spurred production of cheaper copycat versions of Novo Nordisk’s
drugs. To ensure the supply of medicines facing shortages, U.S. federal law allows
companies to produce versions of patented drugs via a process of mixing ingredients
called compounding.
The
F.D.A. said this year that the shortage was over and ordered producers and
sellers of the copycat weight-loss drugs to wind down. But Novo Nordisk said that
never happened. Compounders have continued to offer what they call “personalized”
versions of the drugs, a legally murky practice which they claim is allowed by the
law.
Novo
Nordisk said last week that more than one million people were still using compounded
GLP-1s, eating into the company’s market share and forcing it to slash sales and
profit forecasts. Its shares promptly dropped more than 20 percent, erasing more
than $70 billion in market value in a day, and some analysts lowered their recommendations
on the company.
One
of them was Mr. Kumar, who had been advising investors buy Novo Nordisk’s shares
for at least two years before downgrading last week to “hold.”
Compounding
was part of the reason. “Novo is issuing a lot of cease-and-desist orders, but it
has been very difficult to stop them,” he said, adding that he had never seen compounding
at this scale before.
On
Wednesday, Novo Nordisk said it had filed 14 new lawsuits against compounders the
day before. “It’s important that we get compounding off the market because right
now it has equal size of our business,” said Lars Fruergaard
Jorgensen, the departing chief executive.
Compounders,
in particular, have targeted Wegovy because it was the
most well-known brand, Mr. Kumar said. That has helped Eli Lilly to get an edge.
Eli Lilly catches up, and
then some
Novo
Nordisk had a huge head start. After Ozempic went on sale,
it was another four and a half years before a serious competitor emerged: Eli Lilly’s
Mounjaro, the brand name for tirzepatide,
a drug used to treat diabetes.
Mounjaro proved to be more effective, leading to
greater weight loss in clinical trials. Many patients said they preferred it. At
the start of this year, Eli Lilly’s Zepbound, which is
tirzepatide marketed for weight loss, passed Wegovy in new prescriptions in the United States, according
to IQVIA, an analytics company.
Unlike
Novo Nordisk, Eli Lilly also found ways to get its product to consumers more cheaply,
and compete with telehealth companies offering compounded copycat versions, by
selling its drug in vials with syringes instead of the more expensive pens with
pre-filled doses.
Novo
Nordisk was further hampered by its slowness in introducing a direct-to-consumer
sales platform. NovoCare Pharmacy launched in March, 14
months after LillyDirect.
“Lilly
was doing all these things, and Novo wasn’t,” said Emily Field, an analyst at Barclays,
who recently downgraded the stock.
“It
felt like a lot of this was one big own goal,” she said.
Novo’s
pipeline struggles to impress
More
than anything, a company’s market value is determined by investors’ expectations
for earnings in the future. For a pharmaceutical company, that means the drugs in
its pipeline. This has helped Eli Lilly’s stock outperform Novo Nordisk’s this year.
Investors
and analysts are particularly interested in the prospects of weight-loss pills,
which could reach more patients than injections. Eli Lilly’s daily pill, orforglipron, has been showing promising results in late-stage
clinical trials, with similar weight loss to Novo Nordisk’s injections and fewer
restrictions on its use. Novo Nordisk’s oral tablet leads to less weight loss than
its injections, but the company has other pills in development.
On
Thursday, Eli Lilly said that its orforglipron tablets
led to 12 percent weight loss, slightly less than analysts expected, which dented
Eli Lilly’s shares and gave Novo Nordisk’s a boost. But Eli Lilly also raised its
overall earnings forecast for the year, on greater demand for Zepbound.
In
developing its pipeline, Eli Lilly is “deploying capital and running faster than
Novo in a market that isn’t going to be patient in any way,” said Seamus Fernandez,
an analyst at Guggenheim Partners.
Can a new leader make a
difference?
The
Novo Nordisk Foundation, which controls Novo Nordisk through its holding company,
has also grown impatient. At the foundation’s urging, Mr. Jorgensen, who had been
chief executive of the company since Ozempic came onto
the market, stepped down.
Maziar Mike Doustdar
took over the top role on Thursday, the first non-Dane to run the company. Mr. Doustdar, an Iranian-born Austrian citizen who grew up in the
United States, joined the company in 1992, for what he thought would be a summer
job making photocopies.
“He
has a bias for speed, for pace and for action,” Helge Lund, the chair of the board
of directors, said when announcing Mr. Doustdar’s appointment.
Concerns
are mounting that analysts may have overestimated the potential size of the weight-loss
market, or at least how easily more people will gain access to these drugs. At the
same time, President Trump is pressuring companies to lower drug prices and threatening
tariffs on medicines produced abroad, casting a cloud over pharma firms’ business
models.
“I
still believe there’s a big market,” said Mr. Powell of Polar Capital, which invests
in both Novo Nordisk and Eli Lilly. But broad concerns about the market are hitting
Novo Nordisk hardest, he added.
There
probably isn’t anything a new chief executive could do to “dramatically change”
the outlook in the next one or two years, Mr. Powell said.
“The
reality is what it is,” he said. “Lilly’s product is seen as better.”