Novo Nordisk’s Entire Board Is Stepping Down in a Surprise Move. Here’s Why.

Novo Nordisk manufactures the weight-loss drug Wegovy. (Charlotte de la Fuente/Bloomberg)

Key Points

• All independent directors of Novo Nordisk, including the board chair, will resign in November due to a dispute with the controlling foundation.
• The Novo Nordisk Foundation plans to install a new board led by its chair, Lars Rebien Sørensen, a former CEO of the company.
• The foundation, which owns over 25% of shares and controls over 70% of votes, sought a “comprehensive renewal” of the board.

All of Novo Nordisk’s independent directors, including the chair of its board, will step down in November, after a disagreement with the foundation that controls the drugmaker, the company said.

The unexpected board overhaul comes amid an already tumultuous year for the company, which announced plans last month to cut 9,000 workers globally. Novo Nordisk is still struggling to recover from the stock selloff that began last year as its weight-loss drug Wegovy lost its once-commanding market lead. And new CEO Mike Doustdar is only two months into the job, after the board announced plans to fire his predecessor in May.

The Novo Nordisk Foundation plans to replace the board with a slate of directors led by the foundation’s chair, Lars Rebien Sørensen, who was CEO of the company a decade ago. The Danish nonprofit owns more than 25% of the pharmaceutical company’s shares, and controls more than 70% of the votes.

Sørensen said the company board and the foundation didn’t see eye to eye on the extent of a planned board shake-up. On an investor call early Tuesday, Sørensen said the foundation had wanted a “comprehensive renewal” of the board, and that the existing board had disagreed, and ultimately stepped down en masse.

“It was impossible to reach an agreement between the views of the current board and the foundation board,” he said.

The announcement arrived without warning; Sørensen said the foundation had not consulted other large shareholders about its actions. Novo’s American depositary receipt was down 1.6% on Tuesday.

The drugmaker will hold an extraordinary general meeting of shareholders on Nov. 14, to elect a slate of new board members nominated by the Novo Nordisk Foundation, led by Sørensen. Sørensen, who was CEO of the company from 2000 through 2016, said he doesn’t intend to remain in the chairman position for more than three years.

The unexpected replacement of the Novo Nordisk board represents its breakdown in relations with the foundation, which has pushed for change at the company in recent months.

While Sørensen said Tuesday the foundation supports the company’s restructuring plans that included the layoffs of 9,000 employees, he called the workforce reduction “a huge failure” in comments on the call. He also said the company’s management and board had been “too slow” to recognize changes in the weight-loss market.

Novo Nordisk launched its weight-loss injection Wegovy years before rival Eli Lilly’s Zepbound. As a result, Novo’s shares soared through 2023 and early 2024, amid enormous enthusiasm for the potential of the new class of weight-loss medicines. But as demand accelerated, Novo couldn’t manufacture enough doses of the shot, allowing an enormous market of legal Wegovy knockoffs to blossom in the U.S. and cannibalize market share. A promised follow-up drug, CagriSema, has produced disappointing clinical data.

The company—along with investors—is still adjusting to diminished expectations for its weight-loss franchise. Novo’s ADR fell 21.8% on a single day in July, when the company cut its full-year guidance.

The stock is down 60% from the start of July 2024, and investors have found little to draw them back to the company in recent months.

Doustdar, who replaced Lars Fruergaard Jørgensen as Novo CEO in August, was not on the company’s media call Tuesday, though the foundation said they support his appointment.

When Novo Nordisk announced plans to fire Jørgensen in May, the company’s board chair, Helge Lund, said that the foundation had wanted Jørgensen out. Now, Lund is headed out, too.

Under new CEO Doustdar, Novo Nordisk has shown a more aggressive face. The company is hyping the launch of an oral version of Wegovy, which it has slow-walked for years, as a rival to Lilly’s experimental weight-loss pill orforglipron. The company also announced a $4.7 billion acquisition earlier this month.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com