How Ozempic's Maker Lost Its Grip on the Obesity Market It Created

Wall Street Journal

2 days ago

In 2023, Novo Nordisk NVO -2.61%decrease; red down pointing triangle was the most valuable company in Europe, surpassing LVMH on the back of soaring demand for Ozempic and Wegovy.
Today, the Danish company has lost its grip on the anti-obesity market it carved out.
The company has lost market share amid production missteps and a bungled rollout of Wegovy that led to shortages. Its U.S. rival Eli Lilly LLY -0.80%decrease; red down pointing triangle—initially in the rearview mirror—has been proven to have the more effective weight-loss drug and a more promising pipeline of next-generation treatments. Novo Nordisk's research-and-development machine has disappointed, and a key marketing strategy was slow to get off the ground.
Novo Nordisk's ability to stay atop a market that analysts see growing to $150 billion in annual sales is now in doubt. Its controlling shareholder this month forced a surprise ouster of the company's chief executive, Lars Fruergaard Jørgensen. And while it is still generating multibillion-dollar sales for Ozempic and Wegovy, shares have tumbled more than 50% over the past year.
If Novo Nordisk doesn't turn things around, it could join a long list of companies that blew a first-mover advantage, from Sunshine Biscuits—whose Hydrox cookies were overtaken by now-iconic Oreos—to the Myspace social network.
'Everyone wants to be the first footprints on the empty beach,' said Americus Reed, marketing professor at the Wharton School of the University of Pennsylvania. 'But it depends on how you land on that first move. The second mover is watching them make mistakes. You're able to identify those and not make those mistakes.'
A Novo Nordisk spokeswoman said the company remains the global-volume market leader in GLP-1 drugs, serving nearly two-thirds of patients taking them for diabetes and obesity.
Some investors and industry watchers say Novo Nordisk's troubles stem from a cautious, reactive approach starting when the market first burst onto the scene, in contrast with a faster, more aggressive tack in production and marketing by Lilly.
'Novo is always a step behind,' said Yuri Khodjamirian, chief investment officer at Tema ETFs, which owns Novo Nordisk shares.
One of Novo Nordisk's early stumbles was underestimating the demand for Wegovy—the weight-loss version of semaglutide, the same compound as diabetes drug Ozempic—ahead of its 2021 launch. The company's planning was informed by its experience generating modest sales for an earlier weight-loss drug, Saxenda. Doctors were skeptical of it, and many health-insurance plans in the U.S. didn't cover weight-loss drugs.
Novo Nordisk thought Wegovy might run into the same market constraints as Saxenda, so the company planned modest production levels, using a combination of in-house and contract manufacturing capacity.
It wasn't enough. It took only five weeks for the prescription rate of Wegovy to exceed the level that Saxenda had taken five years to reach. Jørgensen recalled later, in an interview in 2024, that he initially thought: ''That's patients who've been lined up, there's pent-up demand, it will normalize.' It didn't. It just kept growing.'
The company responded by limiting demand—the last thing a drugmaker wants to do with a new product. Sales representatives asked doctors not to start new patients. The company resorted to rationing by withholding the lower, starter doses for new patients, to conserve supplies for existing patients taking the higher doses.
The shortages opened the door for competition. They made it legal for special pharmacies in the U.S. to make compounded, copycat versions of semaglutide that sold for much less than list prices for Ozempic and Wegovy. Telehealth firms capitalized on the new, lower-cost supply by hawking the compounded versions, taking away market share from Novo Nordisk.
The shortages gave rival Eli Lilly time to catch up. Lilly introduced Mounjaro for diabetes in 2022, followed by Zepbound, a weight-loss version of the same drug, in 2023. Zepbound has been shown in studies to induce greater weight loss than Wegovy, more than 20% of body weight.
Although Lilly also encountered shortages due to high demand, it was able to resolve them more quickly than Novo Nordisk. Now, weekly U.S. prescriptions for Lilly's Zepbound have surpassed Wegovy's. Mounjaro still trails Ozempic but is closing the gap.
Novo Nordisk has spent billions of dollars trying to expand manufacturing capacity, including an unusual deal last year for its controlling foundation to acquire the contract manufacturer Catalent for $16 billion.
The R&D race for future weight-loss drugs also has tilted in Eli Lilly's direction. Lilly has reported favorable clinical-trial data for two closely watched experimental drugs, including a pill version that analysts think could be appealing to people who don't want injections.
Novo Nordisk, meanwhile, has had some R&D disappointments, including studies of an experimental combination weight-loss drug dubbed CagriSema. The less-than-expected results of one study sent Novo Nordisk shares plunging more than 20% in one day in December, wiping out nearly $100 billion in stock-market capitalization for the company. Some analysts have cut their sales forecasts for the drug.
Lilly has gained an edge on the marketing front as well. The company beat Novo Nordisk to the punch in launching a direct-to-consumer, online service selling weight-loss drugs at discounted cash prices, aimed at people who don't have insurance coverage. And it was first to strike a deal with a big telehealth firm, Ro, to sell a discounted weight-loss drug. Novo Nordisk eventually made similar moves, but months after Lilly.
'They seem to be missing a lot of these kinds of strategic endeavors to help sell into a market that is different from a lot of pharma markets,' said BMO Capital Markets analyst Evan David Seigerman.
The Novo Nordisk spokeswoman said the company resolved its shortages before announcing its direct-to-patient service and striking telehealth deals.
Novo Nordisk isn't out of the race. The company can still turn things around by leaning into CagriSema, which generated solid weight-loss data even if it missed expectations, and by developing other new drugs that target various segments of the growing market, Seigerman said.
More recently, Novo Nordisk has shown signs of being more aggressive. It signed a deal with CVS to make Wegovy the preferred weight-loss drug for members of its drug-benefit plans.
Author Hanne Sindbæk, who has written two books about Novo Nordisk, says there has been an eternal tug of war inside the company between those who are guided by values—the idea that the company works for the common good rather than simply to make a profit—and those who run the business. If Novo Nordisk wants to stay in the game, it may have to lean toward the latter in choosing its next CEO.
Jørgensen, the outgoing CEO, is still in his role while the company searches for a new chief. His predecessor as CEO, Lars Rebien Sørensen, who is chairman of the foundation that has voting control of the drugmaker's shares, will join the Novo Nordisk board of directors.
'Now they need somebody more business-driven,' Sindbæk said.
Write to Peter Loftus at [e-mail] and Noemie Bisserbe at [e-mail]