Novo Nordisk’s Profit Surge Masks Near-Term Headwinds: A Deep Dive Into the GLP-1 Race

Novo Nordisk reported a robust 29.03 billion Danish kroner ($4.4 billion) net profit for Q1 2025, exceeding expectations, but the Danish pharmaceutical giant also issued a stark warning: U.S. market challenges have forced it to cut its full-year sales and profit growth forecasts. The revision underscores the intensifying competition in the GLP-1 receptor agonist (GLP-1RA) market, even as Novo Nordisk remains the undisputed leader in obesity and diabetes treatments.

A Strong Start, But Clouded by Compounding

The company’s Q1 results highlighted the enduring demand for its GLP-1 drugs, notably Ozempic (diabetes/weight loss) and Wegovy (weight loss). Combined sales of these drugs reached 50.08 billion Danish kroner, driving a 19% rise in diabetes and obesity care revenue to 73.5 billion kroner. Adjusted EPS of $0.99 beat estimates, while total revenue grew 18% year-over-year to 78.09 billion kroner.

However, the outlook for 2025 was slashed. Sales growth guidance was reduced to 13%–21% (from 16%–24%), and operating profit growth to 16%–24% (from 19%–27%). The culprit? U.S. compounded generics.

The Compounding Crisis: A Temporary Setback?

Compounded versions of Novo’s semaglutide, produced by pharmacies during a 2022–2023 shortage, have eroded branded sales in the U.S. Despite the shortage ending in February 2025, compounded drugs—often cheaper and accessible via telehealth platforms—continued to undercut Wegovy and Ozempic. Wegovy sales fell 7% short of analyst estimates, while Eli Lilly’s rival Zepbound gained traction.

CEO Lars Fruergaard Jørgensen framed this as a temporary issue. The FDA’s May 22 deadline to halt compounded semaglutide production should reduce competition in H2 2025, allowing branded sales to rebound. Novo also partnered with telehealth firm Hims & Hers to steer customers toward its NovoCare Pharmacy, which dispenses branded treatments.

Strategic Bets and Pipeline Momentum

Novo Nordisk is doubling down on innovation to maintain its edge:
1. Oral Semaglutide: An FDA decision on a 25 mg oral formulation for obesity is expected by late 2025. This could be the first oral GLP-1RA, addressing a major unmet need.
2. CagriSema: A next-generation obesity drug showed 15.7% weight loss in trials and is slated for regulatory filing in early 2026.
3. Global Expansion: Wegovy now operates in 25 countries, with plans to add more markets.

The rare disease segment, however, lagged, with sales rising just 3% as hemophilia A drug sales fell 10%.

Risks and the Stock’s Turbulent Ride

While investors cheered the Q1 results—shares rose ~6% post-announcement—the stock remains down 22.9% year-to-date as of May 2025. Key risks include:
- Supply constraints: Periodic shortages in some regions could persist.
- Price competition: Both Novo and Eli Lilly have cut prices for cash-paying patients, risking margin pressure.
- Regulatory hurdles: Delays in approvals for CagriSema or oral semaglutide could slow growth.

Conclusion: A Leader Navigating a Tumultuous Market

Novo Nordisk’s Q1 results confirm its dominance in the GLP-1RA space, with 72% global market share in obesity and diabetes treatments. While U.S. compounded generics and Eli Lilly’s Zepbound pose near-term threats, the company’s strategy—combining regulatory actions, new product launches, and market expansion—positions it for a strong second-half recovery.

Long-term, the outlook is bullish. Global obesity prevalence (projected to hit 1.3 billion people by 2030) ensures sustained demand for Wegovy, which could peak at $26 billion in annual sales by 2031. Meanwhile, the pending oral semaglutide approval and CagriSema’s potential to deliver superior weight loss outcomes could solidify Novo’s leadership.

Investors should focus on H2 2025 for signs of recovery: reduced compounded drug sales, oral semaglutide’s FDA nod, and global market gains. While the stock’s YTD performance is weak, the fundamentals suggest this is a buy-the-dip opportunity for those willing to look past near-term turbulence.