Novo Nordisk Navigates Compounding Challenges: A Strategic Crossroads in the Obesity Drug Market

The Danish pharmaceutical giant Novo Nordisk, a leader in the booming GLP-1 receptor agonist market for obesity and diabetes, faces a critical inflection point in 2025. Despite posting robust first-quarter profits, the company has revised its full-year financial outlook downward, citing U.S. market pressures from compounded generic drugs. This analysis explores the implications of these headwinds and the strategies Novo Nordisk is deploying to reclaim momentum.

Q1 Results: Profit Rises, But Sales Fall Short

In Q1 2025, Novo Nordisk reported a 29.03 billion Danish krone ($4.4 billion) net profit, surpassing analyst forecasts of 27.8 billion kroner. Total revenue rose 18% year-over-year to 78.09 billion kroner, narrowly missing the 78.18 billion kroner consensus. While Ozempic sales surged 15% to 32.72 billion kroner—beating expectations—the star product, Wegovy, disappointed. Wegovy sales grew 83% to 17.36 billion kroner but fell short of the 18.51 billion kroner target, highlighting the impact of compounded generics.

The obesity care segment, which accounts for nearly half of Novo’s sales, saw a 65% revenue jump, while diabetes care grew more modestly at 11%. This divergence underscores the outsized role Wegovy plays in the company’s growth trajectory—and the vulnerability it now faces.

The Compounding Dilemma: U.S. Market Headwinds

The outlook revision stems from a sharp decline in branded GLP-1 market share in the U.S., where compounded pharmacies have been legally producing generic versions of semaglutide since the FDA declared a drug shortage in early 2022. These compounded alternatives, priced 30–50% lower than branded products, eroded demand for Wegovy and Ozempic.

However, the FDA lifted the shortage designation in February 2025, requiring compounding pharmacies to halt sales of semaglutide copies by May 22, 2025. Novo Nordisk CEO Lars Fruergaard Jørgensen called this a “turning point,” predicting that branded sales will rebound in the second half of the year. The company has also pursued legal action against non-compliant pharmacies and expanded access to branded drugs via partnerships with telehealth platforms and pharmacies like CVS.

Strategic Offensives and Competitive Pressures

To counter rivals like Roche (ROG), AstraZeneca (AZN), and AbbVie (ABBV), Novo Nordisk is accelerating its pipeline. In early 2026, it plans to file for approval of CagriSema, a weekly subcutaneous obesity drug that outperformed semaglutide in trials. The company has also applied for U.S. approval of an oral semaglutide formulation, positioning it as the first oral GLP-1 treatment for obesity—a major innovation given the current focus on injectables.

Yet challenges remain. CagriSema’s trial results, while positive, showed a small but concerning increase in gallbladder-related adverse events. Competitors are also closing in: Roche’s tirzepatide, for example, has demonstrated superior weight loss in trials but faces regulatory hurdles.

The Investment Case: Near-Term Pain, Long-Term Gain?

Novo Nordisk’s stock has fallen 23% year-to-date as investors grapple with the outlook cut and compounded generic pressures. However, shares rose 5.8% in early trading after Q1 results, signaling optimism about the FDA’s intervention and the company’s strategic moves.

Analysts at UBS maintained a “buy” rating, noting that the outlook revision aligns with market expectations and that the second-half recovery could drive a “relief rally.” The firm’s 12-month price target of 750 Danish kroner (up from 700) suggests confidence in the long-term narrative.

Crucial metrics to watch include:
- U.S. branded market share recovery post-May 2025
- CagriSema’s regulatory fate and adverse event management
- Oral semaglutide’s approval timeline and pricing strategy

Conclusion: A Recovery Rooted in Resilience

Novo Nordisk’s 2025 outlook cut is a temporary setback in a market it dominates. The FDA’s actions and the company’s aggressive access strategies position it to rebound strongly in H2 2025, with branded sales potentially reclaiming 80–90% market share by year-end. Longer term, CagriSema and oral semaglutide could solidify its leadership, even as competition intensifies.

Investors should weigh the near-term pain—23% YTD stock decline—against the structural growth of the obesity drug market, projected to reach $40 billion by 2030. Novo’s Q1 profit beat and strategic agility suggest it’s navigating these challenges with discipline. For the risk-tolerant, the stock’s current valuation (18x 2025E EPS) offers a compelling entry point ahead of what could be a transformative second half. The path forward is clear, but the execution will determine whether Novo Nordisk’s downward revision proves a mere blip or a warning of deeper industry shifts.