Novo Nordisk slashes 9,000 jobs to slim down in fierce weight-loss drug battle

COPENHAGEN: Novo Nordisk the maker of blockbuster weight-loss drug Wegovy, said on Wednesday it will cut 9,000 jobs in a bid to reignite growth and fend off intense competition from U.S. rival Eli Lilly and a wave of compounded copycat drugs.

The restructuring, including the largest layoff in Denmark’s history, is expected to save 8 billion Danish crowns ($1.25 billion) annually and comes as Novo Nordisk is battling to revive its fortunes under a new CEO after it lost its lead to Eli Lilly in the obesity and diabetes markets.

Sales growth has stalled and shares have slumped, knocking $450 billion off the Danish company’s market cap since the middle of last year and hurting the local economy. The company issued its third profit warning this year on Wednesday, citing 9 billion crowns in one-off costs tied to the overhaul.

“They need to reignite investor confidence with an appealing growth story for the future,” said Novo Nordisk shareholder Lukas Leu, a portfolio manager at ATG Healthcare.

“The obesity market was misjudged. It’s much more consumer-driven than anticipated, and Novo expanded organisational complexity too quickly.”

Novo’s meteoric rise began in mid-2021 when Wegovy became the first highly effective obesity drug approved in the U.S., catapulting the firm to the top of Europe’s stock market.

But a hiring spree that nearly doubled its headcount over five years has now backfired. The layoffs - around 11.5% of the total workforce - take Novo’s headcount back to early 2024 levels, said Redburn Atlantic analyst Simon Baker.

Denmark’s economy remains robust despite the job cuts at Novo Nordisk, Danish Finance Minister Nicolai Wammen told Reuters, dismissing concerns they could further impact the country’s economic outlook.

Investors in July wiped some $70 billion off the drugmaker’s market value after Novo warned on profits and named company veteran Mike Doustdar as its new CEO.

Shares have fallen nearly 46% since the start of the year, bringing its market capitalisation to around $181 billion — well below its peak of approximately $650 billion last year.

Bank of America analysts said they now expect Novo to issue a fourth profit warning when it reports third-quarter results in November, doubting the company can meet the top end of its sales guidance.

Shares in Novo Nordisk were up 2.1% at 1315 GMT, having initially fallen 3%.

Cutting the fat

Novo is slimming down while also trying to boost output to meet rising demand for its products and readying the pill version of Wegovy as well as exploring the additional health benefits of its GLP-1 portfolio.

“This is the new CEO’s first major move to simplify Novo’s structure and redirect resources toward growth in diabetes and obesity,” said Michael Novod, head of equity research for Denmark at Nordea Bank.

Novo Nordisk, which employs 78,400 globally, has faced challenges as sales of Wegovy and diabetes treatment Ozempic begin to lose momentum, particularly in the United States.

Eli Lilly’s Zepbound overtook Wegovy in weekly prescriptions in the U.S. earlier this year, although Wegovy prescriptions began to increase at a faster pace over the summer, narrowing Lilly’s lead in the critical market.

CEO Doustdar said the overhaul delivers on the priorities he outlined when he assumed leadership last month: sharpening focus on diabetes and obesity, strengthening commercial execution, and redirecting resources toward growth areas.

Reinvest savings

The company now expects operating profit growth for 2025 to be between 4% and 10%, down from the 19%-27% range it forecast at the beginning of the year.

In a call with Danish media, Doustdar said the company will reinvest the savings into its drug pipeline and obesity launches in new markets, pointing to rising costs tied to a commercial strategy that now includes selling its drugs via consumer platforms such as telehealth in order to be competitive.

“We need to have the best-in-class launches, especially as competition is increasing,” he said. “We want to make sure we don’t have to spare a dime.”

The company declined to specify which business units would be impacted.

Markus Manns, a portfolio manager at Union Investment and longtime Novo shareholder, said some of the costs included in the company’s restructuring plans announced on Wednesday stem from early-stage pipeline write-downs.

The layoffs, which will affect 5,000 workers in Denmark, follow a global hiring freeze announced last month for non-essential roles. Novo Nordisk expects to save 1 billion crowns in the fourth quarter and reaffirmed its commitment to reinvesting those savings into research and development, manufacturing expansion, and improving global patient access.