Novo Nordisk announces layoffs after a 60% drop in its stock value

Danish company Novo Nordisk, maker of the weight-loss drugs Ozempic and Wegovy, announced a cut of 9,000 jobs, equivalent to 11% of its workforce. The announcement comes after its shares fell 60% in the last twelve months.

Just two years ago, the company had become the most valuable in Europe, surpassing the French luxury conglomerate LVMH. However, the entry of new competitors and changing market dynamics have drastically altered its financial outlook.

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“Our markets are evolving, especially the obesity market, as it has become more competitive and consumer-oriented. Our company must also evolve,” said new CEO Mike Doustdar. He added that organizational complexity and costs have increased, prompting the adoption of adjustment measures.

Novo Nordisk announced it expects to save $1.3 billion by 2026, funds it plans to reinvest in the development and commercialization of new drugs. The company also stated it will launch other initiatives to increase employee productivity.

Competition in the United States

The US market has established itself as the main arena for the dispute between pharmaceutical companies producing anti-obesity drugs. Eli Lilly, one of Novo Nordisk's strongest rivals, manufactures Mounjaro and Zepbound, drugs that, according to clinical trials, have demonstrated greater efficacy than Ozempic and Wegovy. Added to this is Eli Lilly's commercial strategy, which launched a cheaper version of Zepbound through its direct sales platform, LillyDirect, thus increasing the pressure on Novo Nordisk.

U.S. President Donald Trump publicly expressed his support for Eli Lilly CEO Dave Ricks, calling him a "great gentleman" who has done a "fantastic job." In May, the president said the pharmaceutical company would not face tariffs due to the construction of new plants on U.S. soil.

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Faced with this situation, Novo Nordisk has filed more than 100 lawsuits in various US states to stop the production of unauthorized versions of its injections. Market analysts believe these legal actions are unlikely to significantly change its sales trend in the United States.

Another factor that has affected the company is the proliferation of counterfeit drugs , which led the World Health Organization to issue an alert about fraudulent versions of Ozempic.

Challenges in the production and development of new drugs

Industry experts cited by Bloomberg point out that Novo Nordisk made decisions in its production model that have impacted its results. Unlike Eli Lilly, which opted for faster, outsourced chemical processes, the Danish pharmaceutical company focused on in-house production based on yeast cultures, a method that is more difficult to scale to large volumes. The company also faced difficulties scaling up global demand for its injections and had to expand its manufacturing infrastructure with new plants. Despite these efforts, supply failed to meet market expectations.

In terms of innovation, the company failed to achieve the expected results with CagriSema, a next-generation drug, or with its project to develop an anti-obesity pill. Given this situation, it is seeking approval for Wegovy as a preventive treatment for strokes and heart attacks, which could open up new market opportunities.

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How weight loss medications work

Currently, there are two broad categories of obesity drugs: those based on semaglutide, such as Ozempic and Wegovy, and those based on tirzepatide, such as Mounjaro. Semaglutide injections, originally developed to treat diabetes, have become popular among those seeking weight loss. They are administered weekly in the arm, thigh, or abdomen and work as appetite suppressants by mimicking a hormone that increases feelings of fullness.

Mounjaro, for its part, in addition to suppressing appetite, affects metabolism and regulates the body's energy balance.

Patients start with low doses that are increased until a maintenance level is reached. However, these medications are not without side effects, including nausea, constipation, and diarrhea. Demand for these types of treatments has grown significantly in recent years, driven in part by changes in lifestyle habits following the pandemic.

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