Novo Nordisk's Ozempic and Wegovy: Balancing Dominance with Emerging Safety Risks

The meteoric rise of Novo Nordisk's semaglutide-based drugs, Ozempic and Wegovy, has been a story of unmatched commercial success. Together, they generated over $20 billion in global sales in 2024, fueled by soaring demand for weight-loss solutions and diabetes management. Yet, beneath this triumph looms a growing shadow: regulatory scrutiny and safety concerns tied to a rare eye disorder, non-arteritic anterior ischemic optic neuropathy (NAION). As the European Medicines Agency's (EMA) review of semaglutide's potential link to NAION continues, investors must weigh near-term volatility against the long-term sustainability of Novo Nordisk's growth narrative.

The Regulatory Crossroads: EMA's Review and Study Limitations

The EMA's Pharmacovigilance Risk Assessment Committee (PRAC) launched its review of semaglutide in early 2025, driven by conflicting observational studies. Two studies published in Ophthalmology and other journals reported a heightened risk of NAION among semaglutide users—up to 8.9% in patients with type 2 diabetes versus 1.8% in controls—while others found no such association. The PRAC is now sifting through clinical trial data, post-marketing surveillance, and mechanistic studies to determine whether a causal link exists.

Crucially, the studies' limitations cloud the picture. Observational data often suffer from confounding factors, such as pre-existing conditions (e.g., diabetes patients already face elevated NAION risk due to vascular issues) and inconsistent diagnostic coding (NAION lacks a specific ICD-10 code, complicating broader analyses). A randomized controlled trial—the gold standard for causality—remains absent, leaving regulators in a bind.

The stock's volatility since early 2025 reflects this uncertainty. Shares dropped 10% in January amid initial EMA review headlines, recovered slightly on conflicting data, and now face renewed pressure as litigation expands and the EMA's timeline drags on.

Litigation Risks and Financial Fallout

While the EMA's review remains unresolved, U.S. litigation has surged. Over 1,200 lawsuits now allege Novo Nordisk downplayed NAION and gastroparesis risks, demanding compensation for vision loss and gastrointestinal harm. The multidistrict litigation (MDL) has focused narrowly on label adequacy and preemption, but if plaintiffs secure gastric emptying scan evidence linking semaglutide to gastroparesis, settlements or penalties could reach billions.

Even without immediate liability judgments, the reputational damage is mounting. A JAMA study cited in the PRAC's review—highlighting a 7.6x higher NAION risk in obese patients—has amplified investor concerns. Should the EMA mandate label warnings, prescribing habits could shift abruptly, particularly among patients with diabetes, who already face heightened risks.

Near-Term Vulnerability vs. Long-Term Growth Prospects

Near-Term Risks:
- Label Changes: If the EMA concludes a causal link, label updates could include “black box” warnings, deterring some physicians and patients.
- Litigation Costs: Legal fees and potential settlements could squeeze margins, especially if U.S. courts rule against Novo.
- Competitor Inroads: Rival drugs, such as Mounjaro (also semaglutide) or emerging therapies from Eli Lilly and others, may capitalize on safety concerns.

Long-Term Outlook:
- Market Dominance: Ozempic and Wegovy's efficacy remains unmatched, and regulatory hurdles elsewhere (e.g., FDA's cautious stance) may delay alternatives.
- Diversification: Novo's diabetes portfolio (e.g., insulin analogs) and pipeline innovations could buffer semaglutide-related headwinds.

Investment Strategy: Caution Amid Uncertainty

For investors, the near-term calculus favors caution. The stock's sensitivity to regulatory and litigation news suggests it's a prime candidate for shorting or hedging via options. Key triggers for downside include:
1. EMA's final decision (expected by early 2026) favoring label changes.
2. U.S. FDA scrutiny or adverse legal rulings.
3. Sales deceleration in NAION-prone patient segments.

Historical data underscores the risks of overcommitting during periods of heightened uncertainty. A backtest of a simple strategy—buying NOVO.N on earnings announcement dates and holding for 30 days from 2020 to 2025—delivered a negative compound annual growth rate (-2.50%) and a maximum drawdown of -77.97%, highlighting the stock's volatility and poor risk-adjusted returns during event-driven periods. These results align with the current advice to prioritize downside protection.

Long-term holders should assess whether Novo can navigate this crisis without permanent damage to its brand. A worst-case scenario—where NAION warnings significantly curb prescriptions—could shave 10–15% off peak Ozempic/Wegovy sales projections. However, the drug's unchallenged efficacy means a rebound is possible if risks are managed transparently.

Final Take

Novo Nordisk's near-term vulnerability stems from its overreliance on semaglutide and the unresolved NAION controversy. While Ozempic and Wegovy remain transformative therapies, the regulatory and legal overhang introduces asymmetric risk: the upside is capped by already-high valuations, while the downside is open to label changes and litigation costs. For now, investors should tread carefully, treating the stock as a short-term sell or hedge until clarity emerges. In the long run, Novo's fate hinges on its ability to balance innovation with transparency—and to convince regulators and patients that the benefits of semaglutide outweigh the emerging risks.

Action: Consider a short position or protective puts on NOVO.N ahead of the EMA's decision. Monitor U.S. litigation developments and quarterly sales updates for early warning signals.
Risk: Overestimating the impact of label changes or litigation; underestimating the drug's entrenched market position.

The clock is ticking. Stay vigilant.