BREAKINGVIEWS-Next Novo Nordisk CEO’s best cure may be mega-M&A

By Aimee Donnellan

LONDON, May 16 (Reuters Breakingviews) - Novo Nordisk’s NOVOb.CO next CEO will have to awaken the company’s animal spirits. On Friday, the $281 billion obesity-drug giant announced that boss Lars Fruergaard Jorgensen would step down after a recent share-price slide. The Danish pharmaceutical group’s reliance on treatments for two related conditions, and a looming patent expiration, will continue to weigh on the company. A big deal, however, could help solve both.

Jorgensen led Novo as its share price hit the stratosphere. In 2018, shortly after his appointment, the company launched Ozempic, a highly successful diabetes medication which also helped patients lose weight. In the years that followed, it launched obesity drug Wegovy. Sales of the treatment ballooned fivefold to $5.5 billion in the two years to 2023.

But in December 2024 the company stumbled, as much-hyped obesity drug CagriSema tested relatively poorly, in terms of patients’ weight loss and side effects. Then last month, rival Eli Lilly LLY.N revealed promising details of a trial of its obesity pill Orforglipron, which initially added $100 billion to its market value and raised the threat of Novo Nordisk’s products being sidelined.

In one sense, Novo Nordisk is a victim of its past success. The Danish group’s drugs are so effective at treating obesity, which often causes diabetes, that it risks reducing the pool of future customers. The competitive threat from rivals only compounds this problem. Analysts reckon 93% of Novo’s revenue this year will come from these two diseases.

Meanwhile, its U.S. patent for semaglutide, the active ingredient in its weight-loss drugs, runs out in 2031, allowing unbranded rivals to produce similar medication for a fraction of the price. Other peers, like Roche ROG.S and AstraZeneca AZN.L, are also working on new treatments that could see them enter the market.

The Novo Nordisk Foundation, which owns 28% of the publicly listed group’s shares and controls 77% of the votes, seems alert to the dangers. The nonprofit investor initiated the CEO change discussions, according to a company statement, and now wants to install Lars Rebien Sorensen to Novo Nordisk’s board. He ran the group from 2000 to 2016, including when it initially developed its star diabetes drugs.

A CEO search is ongoing. It would make sense for the board to focus on candidates’ M&A experience. Rivals have splurged on transformational deals in recent years in a bid to diversify. Pfizer PFE.N bought cancer specialist Seagen for $43 billion in 2023, while AstraZeneca spent $39 billion on U.S. drugmaker Alexion in 2020. Novo Nordisk has shied away from big M&A, instead focusing on in-house blockbusters. That may now have to change. One possible target could be $33 billion Argenx ARGX.BR, which would offer diversification into the growing sector of autoimmune diseases. In other words, the new boss’s first job may be to change Novo Nordisk’s recent scepticism towards large-scale M&A.

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CONTEXT NEWS

Novo Nordisk on May 16 said CEO Lars Fruergaard Jorgensen would step down after a transition period, and that a search for his successor was ongoing.

The Danish drugmaker said the change in leadership reflected recent “market challenges” and a decline in the company’s share price since mid-2024.

In light of these problems, the group’s key shareholder, the Novo Nordisk Foundation, expressed a wish to increase its representation on the board, according to a company statement.

The philanthropic organisation also kicked off talks with Novo Nordisk on the merits of changing the CEO more quickly than previously planned. The foundation owns 28% of the shares and controls 77% of the votes in the publicly listed group. Its Chair Lars Rebien Sorensen, who ran Novo Nordisk from 2000 to 2016, plans to rejoin the board.

Helge Lund, chair of the drugmaker, said that the strategy remained unchanged and that the board was confident in the company’s business plans and its ability to execute them.

The group’s listed class-B shares fell 3.1% to roughly 421 Danish crowns as of 1135 GMT on May 16.