Novo Nordisk's Market Value Plummets 23% Amid Earnings Warning, CEO Change

Novo Nordisk, the manufacturer of the weight loss drug Wegovy, faced a significant market value loss of $700 billion in a single day. This dramatic drop came after the company issued a profit warning and appointed a new CEO. The company had previously lowered its 2025 earnings forecast, adding to the market's concerns. The influx of generic drugs has not only affected Wegovy but also other weight loss medications, leading to a broader impact on the pharmaceutical industry. The situation highlights the challenges faced by pharmaceutical companies in maintaining market dominance amidst increasing competition from generic alternatives.

On Tuesday, Novo Nordisk significantly lowered its 2025 sales growth expectations and announced the appointment of Maziar Mike Doustdar as the new CEO. This is the second time the company has revised its 2025 projections. In a statement, Novo Nordisk attributed the downward revision of its 2025 sales outlook to a reduction in growth expectations for the second half of the year. The company now expects sales to grow by 8% to 14% in 2025, down from the previous forecast of 13% to 21%. Additionally, the company reduced its operating profit growth forecast from 16% to 24% to 10% to 16%.

Since the launch of Wegovy in 2021, Novo Nordisk had become one of the highest-valued companies in Europe, with a market value peaking at $6150 billion in June of the previous year. However, concerns about the company's competitive edge in the weight loss drug market have led to a cumulative decline in its stock price by two-thirds. On Tuesday, the stock closed down 23%, with intraday losses reaching 30%.

Novo Nordisk attributed the downward revision of its sales forecast to the "compounded" competition from generic drugs, which use the same active ingredients as branded drugs. This situation caught investors off guard. During a conference call with investors and analysts on Tuesday, the company's management was unable to alleviate market concerns. The incoming CEO, Doustdar, claimed that "Wegovy's growth momentum is currently very strong."

Barclays analyst Emily Field commented, "This has evolved into a serious credibility crisis. Their assessment of the severity of their problems is significantly different from the market's, causing a lot of trouble." Barclays subsequently downgraded Novo Nordisk's rating from "overweight" to "neutral."

Novo Nordisk stated on Tuesday that it is increasing efforts to win back patients using compounded generic drugs and has intensified dialogue with the U.S. FDA to curb illegal compounded drugs. JPMorgan maintained its "overweight" rating but lowered its target price from 650 kroner to 500 kroner. The bank's analysts noted that while they expect the company's U.S. prescription volume to resume growth soon, "we would not be surprised if investors remain cautious until they see evidence of achieving new targets."