Navigating the GLP-1 Revolution: Novo Nordisk's Restructuring and the Road to Relevance

The GLP-1 obesity drug market is undergoing a seismic shift, with Novo Nordisk and Eli Lilly locked in a high-stakes battle for dominance. . For investors, the question is whether Novo's strategic overhaul can reposition it as a leader or if it will cede ground to a more agile competitor.

The Cost of Transformation

Novo's decision to slash 11% of its global workforce, , reflects a painful but necessary pivot. , but the one-time restructuring costs and downward profit revision signal short-term pain. This move is a direct response to Eli Lilly's Zepbound and Mounjaro, . , .

The restructuring also highlights Novo's struggle with operational inefficiencies. Under former CEO Lars Fruergaard Jørgensen, the company prioritized stability over speed, a culture now being replaced by CEO 's performance-driven approach. While this shift may improve agility, it risks alienating employees and stakeholders accustomed to Novo's historically employee-friendly ethos.

Eli Lilly's Ascendancy

Eli Lilly's meteoric rise in the GLP-1 space is no accident. Zepbound and Mounjaro, both based on tirzepatide, have outperformed Novo's Wegovy in clinical trials and market adoption. , .

Lilly's strategic investments—such as the acquisition of Protomer Technologies for oral incretin tech and partnerships with digital health platforms—have created a moat around its market position. Meanwhile, Novo's pipeline setbacks, including the discontinuation of CagriSema and zalfermin, highlight its reliance on incremental improvements rather than breakthrough innovation.

The Long Game: Innovation vs. Execution

Novo's long-term prospects hinge on its ability to differentiate through innovation. Its amycretin pipeline—a dual GLP-1/amylin agonist—offers a potential edge, as does its oral Wegovy formulation, pending FDA approval. However, these projects are still unproven, and the company's recent R&D cuts (e.g., discontinuing NNC0519-0130 and INV-347) raise questions about its capacity to sustain high-risk, high-reward bets.

Eli Lilly, by contrast, is accelerating its next-gen pipeline. Retatrutide, a triple agonist, has shown 24% weight loss in phase 2 trials, while (an oral GLP-1/GIP candidate) targets patient preferences for non-injectable options. , creating a formidable financial buffer for further R&D and marketing.

Investor Implications: Risk vs. Reward

For investors, Novo's restructuring presents a paradox. , but its revised profit guidance and market share erosion raise red flags. Conversely, , yet its aggressive growth trajectory and diversified pipeline justify the premium.

Key risks for Novo include:
1. Short-Term Earnings Pressure: Restructuring costs and one-time charges will weigh on 2025–2026 profitability.
2. Pipeline Uncertainty: Amycretin and oral Wegovy are unproven, and CagriSema's failure signals execution risks.
3. Market Share Loss: Compounded GLP-1 alternatives and Lilly's dominance in the U.S. could further erode Wegovy's growth.

However, , MASH, ) offer long-term upside. Investors must weigh these factors against Lilly's entrenched leadership and Novo's cultural shift under Doustdar.

Strategic Recommendations

1. Short-Term Play: Consider a cautious approach to Novo Nordisk until its restructuring costs stabilize and oral Wegovy receives FDA approval.
2. Long-Term Play: Monitor amycretin's phase 3 results and Novo's ability to regain U.S. market share through pricing strategies like NovoCare.
3. Lilly Exposure: Allocate a portion of the portfolio to Eli Lilly, given its dominant market position and next-gen pipeline.

Conclusion

Novo Nordisk's restructuring is a bold but risky bet to reclaim relevance in a market now defined by Lilly's innovation and execution. While the company's long-term vision is compelling, the path to profitability is fraught with challenges. Investors must balance Novo's potential for reinvention with the immediate realities of a market where first-mover advantage and clinical differentiation reign supreme. For now, patience and a diversified portfolio remain the best strategies in this high-stakes GLP-1 arms race.