Novo Nordisk is making strategic moves to re-establish itself as a leader in the rapidly expanding weight loss drug sector with a new leadership team.
The Danish pharmaceutical giant announced on Friday that CEO Lars Fruergaard Jørgensen will be stepping down. This change comes as the company’s flagship obesity treatment, Wegovy, faces intensifying competition from Eli Lilly’s recently launched Zepbound. Despite entering the market later, Eli Lilly has rapidly gained momentum, prompting speculation that the weight loss drug market could reach valuations exceeding $150 billion by the early 2030s.
The successor to Jørgensen will have the critical task of narrowing the competitive gap with Eli Lilly, addressing new market entrants, and confronting various systemic challenges. The new CEO will need to accelerate the introduction of next-generation weight loss pharmaceuticals ahead of key patents for Wegovy expiring, while also managing the implications of Medicare drug price negotiations and anticipated tariffs on pharmaceuticals.
While the company has not disclosed potential candidates to replace Jørgensen, it has indicated that both internal and external options are under consideration.
“While Novo [Nordisk] had an early and commanding lead in the obesity market, they now find themselves under significant pressure at a pivotal moment with increasing competition,” remarked BMO Capital Markets analyst Evan Seigerman in a statement on Friday.
In the past, Novo Nordisk held the title of Europe’s most valuable firm, peaking at $615 billion, largely propelled by soaring demand for Wegovy and the diabetes drug Ozempic.
Market enthusiasm for Novo Nordisk has diminished as Eli Lilly continues to enhance its market footprint, along with disappointing clinical trial results from Novo Nordisk’s forthcoming obesity drugs. The Danish company’s shares have plummeted by more than 50% in the past year, resulting in a staggering market value loss exceeding $300 billion.
Even though Novo Nordisk’s stock has risen over 250% since Jørgensen took over in January 2017, Eli Lilly’s shares have soared around 800% over the same time frame under CEO Dave Ricks.
Additionally, the influential Novo Nordisk Foundation, which is the company’s majority shareholder, has recently advised the leadership to consider expediting the CEO transition and enhance representation on the board. This advice comes in response to the foundation’s concerns regarding recent market difficulties and the significant drop in share prices, according to a statement released on Friday.
In a joint decision with the foundation, Novo Nordisk concluded that it was time to seek new leadership. Jørgensen reportedly did not foresee his departure and was only informed of this decision recently, as reported by various news outlets.
Just days before the announcement, Novo Nordisk had already scaled back its sales and profit forecasts for the first time since the debut of Wegovy four years ago.
Seigerman emphasized that it remains uncertain whether the incoming CEO can effectively tackle the challenges currently facing the company.
“While a CEO transition may satisfy investors, without significant strategy adjustments, we foresee a challenging path ahead,” he stated.
Increasing Competition Ahead of New Drug Releases
Novo Nordisk has seen its market share shrink due to Eli Lilly’s encroachment, although Zepbound’s sales have yet to match Wegovy’s financial performance.
According to a report from Seigerman earlier this month, Zepbound and Eli Lilly’s diabetes treatment, Mounjaro, now account for over 50% of U.S. prescriptions for GLP-1 drugs — a class designed to suppress appetite and control blood sugar levels. This marks a significant lead over Novo Nordisk’s combined 46% market share with Wegovy and Ozempic.
New prescriptions for Zepbound outpaced those for Wegovy for the first time in early March 2024, soon after Eli Lilly’s product launch. Analysts estimated by August that Zepbound had captured approximately 40% of the U.S. weight loss drug market, posing a serious challenge to Wegovy.
Bernstein analyst Courtney Breen noted that the shift in market preference illustrates a significant demand for Zepbound among both healthcare professionals and patients, highlighting its superior weight loss results compared to Wegovy.
Novo Nordisk faces hurdles in convincing investors that its future line of weight loss products can sustain its market position, especially with the impending loss of Wegovy’s exclusivity and the potential for lower-cost generic competitors to emerge.
Despite promising results, the company has frequently reassured investors that its CagriSema injection, anticipated for a 2026 release, would facilitate remarkable weight loss, exceeding 25%. However, its performance fell short of this expectation in trials, resulting in a notable drop in the company’s shares.
In April, Novo Nordisk announced it had applied for U.S. approval of an oral version of semaglutide, the active component of Wegovy and Ozempic. This initiative comes as other pharmaceutical companies scramble to create more user-friendly weight loss pills, which could tap into a projected $50 billion segment of the market, according to some analysts.
Nonetheless, Seigerman pointed out a lack of clear strategy regarding Novo Nordisk’s oral obesity drug portfolio, indicating that this may hinder growth in the late decade. As Eli Lilly pushes forward with its own oral obesity solution, this challenge intensifies.
Unlike Novo Nordisk’s oral semaglutide, Eli Lilly’s drug is a small-molecule medication, allowing for improved absorption without dietary restrictions—providing it a potential edge in the market.
Seigerman acknowledged the long-term competitiveness of Novo Nordisk’s experimental small-molecule drug, amycretin; however, the launch is not expected for several years.
In addition to these internal challenges, Novo Nordisk must also navigate external pressures, including the Trump administration’s efforts to reduce drug prices and shift manufacturing to the U.S. The administration has announced plans for tariffs on pharmaceuticals imported into the U.S. and set out an executive order designed to align domestic drug prices with the lowest international prices.
Indications of a Strategic Overhaul
Despite Jørgensen’s unexpected departure, Novo Nordisk reassured stakeholders that its strategic focus remains unchanged.
“We have a robust product pipeline full of potential,” declared Novo Nordisk board Chairman Helge Lund during an analyst call on Friday. “Our experienced executive team will continue to lead and advance the company with a long-term vision.”
Nonetheless, Seigerman noted that the decision to change CEOs suggests a need for strategic realignment.
Investors are already noticing early indicators of this strategic shift, according to Seigerman.
Traditionally focusing on peptide-based therapies, Novo Nordisk appears to be increasingly exploring oral small molecule solutions in the obesity treatment Arena, as indicated by recent collaborations.
Last week, Novo Nordisk announced a licensing agreement with U.S. biotech firm Septerna to develop oral small-molecule medications for obesity and related cardiometabolic conditions.
These early-stage drugs are still years away from market readiness, thus posing potential risks. Similar concerns apply to several of the company’s recent partnerships.
For instance, Novo Nordisk also disclosed in March a commitment of up to $2 billion for rights to an early experimental drug from Chinese pharmaceutical company United Laboratories International.
This new drug is positioned as a rival to Eli Lilly’s advanced Triple G obesity treatment, retatrutide. Retatrutide is currently undergoing late-stage clinical trials and may hit the market well before Novo Nordisk’s new drug.
