When Novo Nordisk A/S Chief Executive Officer Lars Fruergaard Jorgensen dialed into a Teams video call with Chairman Helge Lund, he was expecting an ordinary catchup.
Instead, Jorgensen says Lund was effectively telling him he needed to go.
After a 53% decline over the past year in the share price of the maker of Wegovy obesity shots, setbacks in trials of new weight-loss drugs and intensifying competition from Eli Lilly & Co., the foundation that controls Novo had informed its board it was dissatisfied with the direction of the company.
So on Friday, Novo said it was replacing Jorgensen, the executive who had brought one of the biggest drug franchises of the past decade to market with Ozempic and Wegovy — $26 billion blockbusters that have mushroomed into a celebrity craze and cultural phenomenon.
“I respect that,” Jorgensen, 58, said in an interview. “I think that’s part of the game, so to say. It’s not for me to judge the criteria.”
The move was as much a surprise to the market as it was for the executive. Jorgensen says after the Teams call and in-person meetings that followed over a bit more than a day, it became clear to him that Lund and Novo’s board were seeking a new leader for the company that’s rapidly losing its top spot in the obesity market.
Its arch-rival Lilly is leapfrogging ahead with Zepbound, an obesity drug that has proven it can pare more pounds than Wegovy. More fierce competition is in the cards, with Lilly in the lead in the race for a powerful and easy-to-take obesity pill. Novo’s own next-generation candidate CagriSema, a shot that’s built on its existing blockbuster semaglutide (the main ingredient of Ozempic and Wegovy), has fallen short of both the company’s and analysts’ hopes in clinical trials.
Novo will look at external as well as internal candidates for the next CEO, Lund said in an interview. The drugmaker has had five CEOs in its century-long history, and none of them has come from outside the company. Although on a call with analysts, Lund repeatedly said Novo’s strategy would remain the same, in the interview, he was more nuanced.
Novo’s game plan “must evolve and change to be fit to the market and the environment,” he said. For Lund, the turmoil at Novo coincides with a tumultuous period he has traversed at another company: BP. Last month, he said he would step down from being BP’s chairman as the UK energy giant struggles to win investor confidence after two major strategy pivots on his watch. BP’s market valuation when Lund became chairman was about $106 billion. Now, it’s about $78 billion.
Unprecedented Move
At Novo, Jorgensen’s departure is an unprecedented move for a company that prides itself for its stability. The suddenness of the action is a reflection of the power of the Danish drugmaker’s biggest shareholder, the Novo Nordisk Foundation, which wields enormous sway over how the company is run.
Jorgensen said that prior to the call with Lund, he had always felt strong support from Novo’s board.
“There’s no unsettled issues between management and board,” he said. “There’s been no such, say, gaps in strategic choice. I’ve all along felt strong support in the direction we have pursued based on proper reviews of the strategic options and the choices we have made.”
Like many other Novo managers, Jorgensen has spent his career at the company, which has long been focused on the diabetes market. Insulin had always been Novo’s core product.
When Jorgensen took over as CEO in 2017, the company was navigating a shift toward treating not just diabetes, but also obesity. Ozempic hit the U.S. market in 2018. In 2021, Jorgensen brought its sister treatment Wegovy, for weight loss, to market in the US.
Novo’s shares soared as it became clear the powerful new drugs were creating a new market for obesity treatments. In 2023, the company proved that Wegovy could reduce the risk of heart attacks and strokes, a crucial step toward getting insurers to pay for the expensive treatments.
Then, a bit less than a year ago, Novo’s challenges began to pile up. The company had to defend its prices for Ozempic and Wegovy in Congress, with Jorgensen questioned by Bernie Sanders during a Senate hearing.
Soon thereafter, CagriSema failed to live up to its potential, while Lilly’s medicines delivered clinical wins. Novo also continued to struggle to meet demand for Wegovy, a factor that some analysts now say also helped tilt the market toward Lilly’s competing shot.
“Last year, when Novo was not sending starter doses of Wegovy. I think they started to create a more permanent shift in the market,” said Evan Seigerman, an analyst with BMO Capital Markets. “If a prescriber has an option to write Zepbound or Wegovy and they keep writing Wegovy scripts and their patient can’t find the drug, then they have to go back and write a Zepbound script…You only do that a few times until you say, you know what, I’m done with this. I’m going to permanently shift my prescribing habits to Zepbound.”
Sorensen’s Return
The departure is queuing up a return for Jorgensen’s predecessor, Lars Rebien Sorensen, who led Novo for the first 16 years of the 2000s and will now join the supervisory board, initially in an observer role and as a full board member from next year. The foundation issued a statement supporting Sorensen, saying his “experience and insights will be valuable.”
The wealthiest charitable foundation in the world, the Novo foundation controls the drugmaker via a two-tier share structure that gives it a 77% voting share in the company despite holding 28% of its share capital. Its assets lost 4.8% in value last year, leaving it with holdings of 1.06 trillion Danish kroner ($159 billion), about twice as much as the Gates Foundation.
“Novo is already so depressed we think it offers decent value for those who can look through the short-term uncertainty,” said Mark Ellis, portfolio manager of Nutshell Asset Management Ltd., whose growth fund holds Novo shares that are worth about £6.5 million ($8.6 million).
But for many employees, the news came as a shock.
In a clip posted by Danish broadcaster TV2 on Friday, employees applaud as Jorgensen walks down the stairs in the open, multi-story central atrium of the drugmaker’s headquarters.
“You have truly been a lighthouse for all of us,” Jacob Petersen, Novo’s head of diabetes, obesity and MASH, wrote on LinkedIn.
