GLP-1 Market Volatility and Novo Nordisk's Strategic Risks: A Governance and Legal Crossroads

The biopharma sector has long been a magnet for investors seeking high-growth opportunities, but the recent turbulence in the GLP-1 (glucagon-like peptide-1) market has exposed systemic vulnerabilities. At the center of this storm is Novo Nordisk, whose strategic missteps, governance failures, and mounting litigation risks have turned its once-untouchable market dominance into a cautionary tale. For investors, the company's trajectory underscores the need to reassess exposure to the sector, particularly in an era where regulatory scrutiny, legal liabilities, and corporate governance flaws can rapidly erode value.

Governance Failures: A Foundation Under Strain

Novo Nordisk's foundation-owned model, long praised for its stability and long-term vision, has become a liability in the face of rapid market shifts. The abrupt removal of CEO Lars Fruergaard Jørgensen in May 2025—without prior communication or transparency—highlighted a governance breakdown. The Novo Nordisk Foundation, which controls 70% of voting rights through Novo Holdings A/S, intervened unilaterally, violating the very principles of separation between philanthropy and corporate operations. This lack of communication not only shocked the board but also eroded investor trust, contributing to a 53% drop in the company's share price over 12 months.

The crisis exposed deeper institutional inertia. Eight of the 11 board members had served for over a decade, creating a culture of risk aversion that failed to adapt to disruptive forces like compounded alternatives and telehealth-driven competition. While the Foundation has since proposed governance reforms—such as allowing its chair to attend board meetings—the damage to Novo's reputation as a governance leader is irreversible.

Market Overestimation: The Illusion of Invincibility

Novo Nordisk's market capitalization peaked at $615 billion in March 2024, fueled by the explosive success of Ozempic and Wegovy. However, this valuation ignored critical risks. The company's reactive pricing strategy—cutting Wegovy's price by 50% in 2025—came too late to counter the rise of compounded alternatives, which captured 15% of the market within six months. Meanwhile, telehealth platforms like Mochi Health and Hims & Hers disrupted traditional sales channels, leveraging digital marketing to bypass Novo's established distribution networks.

The disconnect between Novo's market cap and its operational reality is stark. While the company's GLP-1 drugs remain best-sellers, its inability to innovate or adapt to market dynamics has left it vulnerable. Investors who assumed Novo's dominance was a given now face a reality check: the GLP-1 market is no longer a monopoly but a battleground.

Litigation Risks: A Perfect Storm of Legal Exposure

The legal challenges facing Novo Nordisk are both voluminous and severe. As of August 2025, over 2,190 cases are consolidated in MDL No. 3094, with plaintiffs alleging failure to warn about serious side effects like gastroparesis, bowel obstruction, and vision loss (including NAION and RVO). A pivotal August 2025 ruling by Judge Karen Spencer Marston required plaintiffs to provide objective diagnostic evidence (e.g., gastric emptying studies) for gastroparesis claims, narrowing the pool of viable cases but not eliminating the broader liability.

Vision loss lawsuits, meanwhile, are gaining momentum. A June 2025 study in JAMA Ophthalmology linked semaglutide use to a 2x higher risk of neovascular age-related macular degeneration (nAMD), while a CDC-supported study revealed 25,000 semaglutide-related ER visits in 2023. These findings have intensified calls for a black box warning from the FDA—a regulatory shift that would further strain Novo's legal and reputational standing.

Strategic Implications for Investors

The convergence of governance failures, market overestimation, and litigation risks presents a compelling case for rethinking exposure to the biopharma sector. For Novo Nordisk, the path to recovery hinges on three factors:

1. Governance Reforms: The proposed “dual-board representation” model is a step forward, but investors must monitor whether it translates into meaningful transparency and agility.
2. Regulatory Outcomes: The FDA's decision on a black box warning for NAION could redefine the risk profile of GLP-1 drugs, impacting both Novo and its competitors.
3. Litigation Settlements: While no resolution is expected before 2026, the potential liabilities—estimated at $2–$5 billion for severe cases—could strain Novo's balance sheet.

For investors, the lesson is clear: the GLP-1 market is no longer a safe haven. Diversification is key, and exposure to companies with opaque governance structures or aggressive litigation risks should be hedged. While Novo Nordisk remains a dominant player, its current trajectory suggests that the era of unchecked growth is over.

Conclusion: A Call for Prudence

The Novo Nordisk saga is a microcosm of the broader challenges facing the biopharma sector. As regulatory scrutiny intensifies and legal liabilities mount, investors must prioritize companies with robust governance frameworks, transparent risk communication, and diversified product pipelines. For those holding Novo shares, the coming months will be critical. The company's ability to navigate its governance and legal crises will determine whether it can reclaim its position as an industry leader—or become a cautionary tale for the sector.

In a market defined by volatility, the only certainty is the need for vigilance.