Novo Nordisk Stock Is Dropping After Earnings. It Got Worse.

Novo Nordisk cut its full-year guidance last week. (Dhiraj Singh/Bloomberg)

The beleaguered obesity medicine giant Novo Nordisk announced cuts to its drug pipeline on Wednesday, as its weight-loss blockbuster Wegovy struggles to regain market share from Eli Lilly’s Zepbound.

Novo’s American depositary receipts were down 2% on Wednesday, after the company issued a second-quarter earnings report.

The report came after a week-long selloff that followed Novo’s announcement last week of a major guidance cut. The company also previewed its second-quarter results at the time. As of Tuesday’s close, the stock had fallen 31.6% since the July 29 announcement.

On Wednesday, the company said it had stopped development of a number of experimental treatments, including an early-stage weight-loss drug that works similarly to Lilly’s Zepbound, which the company said it was dropping “due to portfolio considerations.” It also said it had dropped development of an early-stage weight-loss pill called INV-347, and a mid-stage treatment for the liver condition MASH called zalfermin.

On an investor call Wednesday morning, the company’s chief scientific officer and head of research and development, Martin Holst Lange, said that zalfermin hadn’t worked well enough in a Phase 2 trial to continue development.

The portfolio haircut wasn’t enough to mollify investors on Wednesday.

Sales of Wegovy were 19.5 billion Danish krone (DKK) in the second quarter, or $3 billion, beating the FactSet consensus estimate for 19.1 billion DKK. Sales of Ozempic, the brand name used for the same medicine when marketed as a Type 2 diabetes treatment, were 31.8 billion DKK, or $5 billion, just short of the 32.4 billion DKK consensus estimate.

Overall second-quarter sales were 76.9 billion DKK, ahead of the 76.8 billion DKK consensus estimate. Diluted earnings per share, which the company announced last week, were 5.96 DKK.

The results themselves weren’t all that bad. But combined with last week’s guidance cut, they do nothing to allay growing concerns about the trajectory for the company’s weight-loss medicines.

Novo’s troubles have come amid a long-delayed reconsideration of the obesity market, as the exuberance of 2022 and 2023 has curdled. As Barron’s wrote last week, Novo’s guidance cut marked the bursting of the obesity drug bubble, which had been leaking air for about a year.

Novo blames the persistent sales of compounded knockoff versions of Wegovy in the U.S. On Wednesday, it said that the volume of compounded GLP-1 drugs sold in the U.S. has “impacted the uptake of Wegovy prescriptions,” and that it’s pursuing litigation to crack down on the compounders.

It’s clear, though, that compounding isn’t the only problem for Novo. The company presented data Wednesday showing that its drug Wegovy is trailing Lilly’s Zepbound in the U.S. As of July, Zepbound accounted for 59% of U.S. branded weight-loss prescriptions, while Wegovy accounted for 40%.

Earlier this year, the company announced a deal with CVS Health that will force patients covered through CVS’s pharmacy benefit manager to take Wegovy rather than Zepbound, and the company said it’s seeing early signs of success from the deal, which went into effect on July 1.

“We do see positive early indicators in recent weeks of prescription data that we believe is riven by the CVS formulary decision,” said the company’s head of U.S. operations, Dave Moore, on the Wednesday investor call.

Meanwhile, investors have seen little reason for optimism.

Last week, Novo slashed its full-year estimates, saying it now sees sales growth in 2025 of 8% to 14%, down from its May estimates of 13% to 21%.

The company also cut profit estimates, saying it now expects full-year operating-profit growth of 10% to 16%, down from its prior estimate of 16% to 24%.

The company also last week announced a new CEO, Maziar Mike Doustdar, a Novo executive who formerly led international operations for the company. Doustdar will succeed Lars Fruergaard Jørgensen on Aug. 7.

Novo shares fell Tuesday following a downgrade from analysts at UBS, who cut their rating on the stock to Neutral from Buy.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com