Novo Nordisk announced a "sweeping transformation" Wednesday as the drugmaker contends with knockoffs chipping away at its blockbuster drugs, Ozempic and Wegovy.
The Danish company will eliminate 9,000 jobs, or 11% of its workforce, in an effort to deliver 8 billion Danish kroner in annualized savings by the end of 2026. That translates to roughly $1.26 billion, based on today's exchange rates.
As a result, Novo also trimmed its operating profit growth outlook to a range of 4% to 10% for the year. CFRA Research analyst Wan Nurhayati, who called Novo Nordisk's move a "sweeping transformation" in a report, noted this is the company's third guidance cut this year. Previously, Novo called for 10%-16% growth in operating profit this year.
"The restructuring underscores management's urgency in reassessing costs to revive momentum amid mounting pressures in its obesity franchise, in our view," Nurhayati said. "While job cuts and reinvestment may strengthen long-term positioning, near-term profitability and growth expectations no longer stand out as clearly ahead of other European peers."
On the stock market today, Novo Nordisk stock rose a fraction to 54.37.
Challenges Continue For Novo Nordisk
Novo Nordisk's challenges with compounders are well known. Companies like Hims & Hers Health and Ro.co have long offered knockoff versions of semaglutide that cost less than their branded counterparts, Wegovy and Ozempic.
As a result, Novo Nordisk has trimmed its outlook for the year. The company now expects sales to grow just 8% to 14%. That's down from its previous guidance for 16%-24% growth in constant currency.
The layoffs and restructuring announced Wednesday are among the first major moves by new Chief Executive Mike Doustdar. Doustdar took the reins in late July after the board ousted former CEO Lars Fruergaard Jorgensen amid lackluster stock performance and growth challenges.
"Our markets are evolving, particularly in obesity, as it has become more competitive and consumer-driven," Doustdar said in a written statement Wednesday. Our company must evolve as well. This means instilling an increased performance-based culture, deploying our resources ever more effectively and prioritizing investment where it will have the most impact."
Novo Nordisk stock has dropped markedly from its peak above 148 in June 2024. Today, shares have a poor IBD Digital Relative Strength Rating of 5. This puts them in the lowest 5% of all stocks when it comes to 12-month performance.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
