Wegovy-maker Novo faces calls to map out strategy beyond weight-loss drugs

By Patrick Wingrove

LONDON, Sept 21 - Wegovy-maker Novo Nordisk's CEO Mike Doustdar will face pressure on Monday to set out his strategy for competing with US rival Eli Lilly and how he plans to boost the company's growth beyond the blockbuster weight-loss drug.

Novo rode a wave of demand after launching Wegovy in 2021 which helped it become Europe's most valuable listed firm in 2023 with a market capitalisation of more than $600 billion.

However, Novo's share price has plunged by more than 70% since its peak, while Lilly's has surged. Sales of the US drugmaker's rival Zepbound treatment are expected to outpace Wegovy this year by more than $7 billion, LSEG data shows.

Now, after trial setbacks and ahead of patent expiries in the early 2030s of semaglutide, the active ingredient in both Wegovy and its twin diabetes medicine Ozempic, investors want clarity on Novo's roadmap, including new growth areas.

"They should work harder in building a third leg ... because in diabetes and obesity, they won't find enough growth opportunities," said Markus Manns, a portfolio manager at Union Investment, which has shares in both Novo and Lilly.

Novo should diversify into therapeutic areas such as cardiovascular or rare diseases, Manns added.

Novo declined to comment.

'TOUGH TASK' TO CONVINCE INVESTORS

Doustdar, appointed just over a year ago, has moved to tighten costs, cull lagging or dead-end clinical programmes and seek targeted acquisitions and partnerships to rebuild a thinning late-stage pipeline.

While the launch of the Wegovy pill gave it momentum earlier this year, Novo suffered a major setback after halting trials of its experimental heart drug, ziltivekimab. This compounded concerns about Novo's long-term sales growth as the clock ticks down on patent protection, four analysts and investors said.

"It will be a very tough task actually to convince the market that the company is in really good shape because of the competition from Lilly, the price pressure, and also the patent expiry of semaglutide at the beginning of the next decade," said Sydbank analyst Soren Lontoft Hansen.

BRUISING YEAR

Novo raised its sales and operating profit growth targets in August to between zero and minus 6% at constant exchange rates versus 2025, up from a previous range of minus 4% to minus 12%.

But its shares were sent tumbling in February on a trial setback for next-generation obesity drug CagriSema, its big hope to take over from Wegovy and help keep up with Lilly in the weight-loss market, which is estimated to be worth $100 billion or more by the early 2030s.

One investor said he wants Novo to break with recent practice and deliver concrete medium-term financial targets, pointing to European rivals such as AstraZeneca, which has forecast $80 billion in annual group revenue by 2030.

Analysts said they wanted a clearer roadmap to navigate rising competition from experimental obesity drugs developed by AstraZeneca and others, as well as the impending semaglutide patent cliff early next decade.

In the short term, Novo can lean on its Wegovy pill, which is holding onto a head start over Lilly's Foundayo, although analysts warned the semaglutide-based treatment still gave only a temporary shield before patent expirations.

With Novo's late-stage pipeline sparse ahead of key trial readouts next year, analysts and investors said they expect management to signal a greater appetite for bolt-on acquisitions or licensing deals, warning that internal research and development alone cannot bridge the looming revenue gap.

Morningstar analyst Karen Andersen said Novo should focus more on promising early-pipeline candidate zenagamtide, rather than continuing to pour money into CagriSema.

"They absolutely need to acquire something - I don't think they have enough power to do this all by their own. I'm not a big fan of tripling down in obesity ... they should buy something in other diseases," said Manns.

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(Reporting by Patrick Wingrove in London; Editing by Josephine Mason, Adam Jourdan and Alexander Smith)