Novo Nordisk falters once again

In the middle of trading, Novo Nordisk shares are down over 20% after another reduction in its outlook for the year - the second in just a few months. Considered an impregnable fortress until June 2024, due to its duopoly, alongside Eli Lilly, in the field of anti-obesity treatments, the Danish group has suffered a series of setbacks. Its return to reality has been brutal: two-thirds of the company's value has gone up in smoke since the stock peaked.

The Danish laboratory now expects sales growth to be limited to 8%-14% (down from 13%-21% previously), while operating profit should rise by 10%-16% (down from 16%-24% previously). The shock highlights how Novo Nordisk's dominance in obesity and diabetes treatments is now threatened by competition, particularly from Eli Lilly.

The American company has taken the lead in both clinical and commercial terms. Its drugs Zepbound (obesity) and Mounjaro (diabetes and obesity) enable patients to achieve greater weight loss and better glycemic control than Wegovy and Ozempic, Novo Nordisk's blockbuster drugs. For several months now, Eli Lilly's treatments have already surpassed those of the Danish company in weekly prescriptions in the US. This is no small feat in a market where patient loyalty is essential. Fears have been heightened by the positive results achieved by orforglipron, a promising new oral anti-obesity treatment that could replace the weekly injections that are currently the norm for patients.

While Eli Lilly's strong performance has dampened Novo Nordisk's spirits over the past year, the slowdown is actually due to a broader and more complex set of factors.

• Investors fear a prolonged slowdown in the US, where Novo generates 75% of its revenue. Massive exposure to the EUR/USD exchange rate could erode margins if the euro strengthens.
• Illegal competition is intensifying. The US black market is already flooded with counterfeit or illegally imported versions of treatments, which are often sold at slashed prices on the internet. This drain on value, which is difficult to stem, is weakening Novo Nordisk's commercial position.
• The political risk is not insignificant. Donald Trump has repeatedly sought to increase pressure on the US healthcare system, notably through budget cuts and changes to eligibility for public health insurance programs (Medicare and Medicaid). This would undermine access to these expensive treatments for some patients, such as those on low incomes.
• The end of patent protection for semaglutide, the active ingredient in the blockbuster treatments Ozempic and Wegovy, in several countries from 2026 onwards paves the way for the arrival of generics. Several specialized companies (including Hikma and Sandoz) are already fighting for the lion's share of the market. These versions could be offered at prices 50 to 80% lower, or even more according to some analysts.
• Finally, the ousting of CEO Lars Fruergaard Jorgensen last May (who will remain in office until next month), orchestrated by the Novo Nordisk Foundation, the company's main shareholder, exacerbated tensions, although some analysts believed that this would allow the company to start again on a better footing.

In 2024, hopes raised by Wegovy sales had propelled Novo Nordisk to the rank of Europe's most valuable company. A year later, the stock has lost two-thirds of its value. The hope of a virtual monopoly now seems to have been shattered. The Danish laboratory is now forced to defend its position, the opposite of what it was trying to do just a year ago.

Novo Nordisk is down 22% at the time of writing. The stock bottomed out at -28% at one point after the targets were lowered. The Danish index, the OMX Copenhagen, in which Novo Nordisk is the second-largest component after DSV, is down 11%.