Novo Nordisk Lowers Full-Year Profit Outlook After Weaker Wegovy Sales

Novo Nordisk announced on Wednesday that it is trimming its full-year profit outlook following weaker-than-expected quarterly sales of its popular weight-loss drug, Wegovy. This news has increased investors’ concerns about increased competition from Eli Lilly.

Impact on Stock Performance:

The update marked the end of a long period of positive earnings reports for Novo Nordisk, which has seen its market value surge to over $500 billion, making it Europe’s most valuable listed company.

Novo shares, which have risen approximately 230% since June 2021, fell 7.7% in early trading and were down 4.7% by 0803 GMT, making them the third biggest faller on the broader STOXX 600 and approaching their February lows.

Quarterly Results and Market Concerns:

The company’s second-quarter profit missed expectations, increasing investor worries about its ability to maintain dominance in the rapidly growing obesity drug market. It is projected to be worth around $150 billion by the early 2030s.

Markus Manns, a portfolio manager at Novo shareholder Union Investment in Germany, noted that the soft results contrast sharply with last year’s significant sales and earnings beats.

CEO’s Response to Competition:

CEO Lars Fruergaard Jorgensen downplayed concerns about competition from U.S. rival Eli Lilly, stating in a media call, “I don’t see the competitive dynamics, at least for the foreseeable future, really having a big impact on how we drive sales.”

He also mentioned that Novo will continue restricting supplies of Wegovy’s lowest or starter dose in the U.S. market to ensure that patients starting treatment can continue.

Revised Profit Forecast and Financial Performance:

Novo Nordisk has revised its operating profit growth forecast for the year to between 20% and 28% in local currencies, down from the previous range of 22% to 30%.

The company attributed a first-half drop in gross margin partly to costs associated with expanding manufacturing capacity.

For the quarter, operating profit rose 8% at constant exchange rates to 25.9 billion Danish crowns ($3.8 billion), falling short of the 27.3 billion crowns forecast by analysts.

Wegovy and Ozempic Sales:

Wegovy sales rose 53% to 11.66 billion crowns, falling short of the 13.54 billion crowns expected by analysts.

CFO Karsten Munk Knudsen described the shortfall as a “quarterly blip,” noting that adjustments to rebates based on last year’s sales estimates affected net sales. Sales of Ozempic, a diabetes drug with the same active ingredient as Wegovy, also missed expectations.

Novo Nordisk reported an impairment loss of 5.7 billion Danish crowns in June related to the end of an advanced kidney disease trial, which impacted operating profit.