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Danish healthcare company Novo Nordisk remains one of Europe’s largest companies by market value despite the shares falling 70% over the last two years.
The fall from grace was preceded by a 540% advance in the shares following US regulatory approval for Novo’s diabetes treatment Ozempic in late 2017.
Novo launched the world’s first treatment for obesity called Wegovy in 2021, which proved very popular among celebrities and politicians due to its effectiveness. It helped patients to shed up to 15% of their body weight over 16 months.
Wegovy became the leading weight loss brand in the US and was the only approved weight loss treatment available until Eli Lilly launched Mounjaro as a diabetes treatment in May 2022 and Zepbound as a weight loss treatment in November 2023.
Today, two companies maintain an effective duopoly in the branded weight loss market, although there are over 100 potential competitors’ products being developed as ‘next generation’ drugs.
Analysts at Morgan Stanley estimate the global obesity drug market could reach $105 billion by 2023 with optimistic scenarios putting the potential as high as $174 billion.
Studies show that obesity drugs also help to reduce risks of heart disease and other cardiovascular conditions related to obesity.
Why did Novo shares subsequently fall so precipitously?
The dramatic decline in the share price was not related to a single cause, but a combination of factors, creating a perfect storm.
Foremost was the intense competition from Eli Lilly’s Zepbound with head-to-head studies showing it induced greater weight loss in patients than Wegovy.
As a pioneer in the weight loss market Novo Nordisk became a victim of its own success and underestimated the huge demand, creating severe shortages and manufacturing bottlenecks.
While Lilly also suffered from shortages it managed the problem more effectively, allowing it to capture market share by having better product availability.
The rise of compounders
Product shortages changed the competitive landscape significantly because under FDA (Food and Drug Administration) rules competitors were allowed to make copycat versions, referred to as compounders, during periods of ‘official’ shortages.
Compounders are sold at a fraction of the listed price of branded obesity drugs which can cost hundreds of dollars a month without medical insurance.
Novo suffered more than Lilly and by mid-2025 the Danish company was forced to slash its sales growth forecast to 14% from over 20%, as compounders gained market share.
These events ultimately led to leadership change at Novo with CEO Lars Fruergaard Jorgensen stepping down in May 2025 to be replaced by longtime company insider Mike Doustdar.
With shortages now removed the FDA has cracked down on compounding pharmacies and misleading marketing of obesity drugs, making it clear that the copycats are not equivalent to approved branded drugs.
How has Novo Nordisk performed recently?
The Danish company revealed significantly better than expected first quarter results on 6 May with adjusted operating profit coming in at DKK 32.86 billion ($5.16 billion) compared with a company-complied consensus analyst forecast of DKK 28.74 billion.
Novo raised full year guidance driven by increased growth expectations for obesity drugs. Sales growth and adjusted operating profit growth is expected to be in a range of 4% to 12% for 2026.
The company said: ‘The strong Wegovy performance, combined with continued growth in International Operations, has led us to raise our 2026 guidance for both adjusted sales and adjusted operating profit.’
Novo’s oral pill takes early lead
The company launched the first ever oral obesity pill in the US on 5 January 2026 which represents a new battleground for the market, providing a needle-free alternative for patients.
Novo’s oral pill booked 1.3 million prescriptions in the first quarter which means it has now booked two million since launch, marking the company’s ‘strongest ever’ obesity launch in the US.
The pill generated sales of DKK 2.3 billion ($325 million) in the first quarter, beating analysts’ expectations.
Pending regulatory approvals, the pill is expected to launch outside the US in the second half of 2026. Unlike the superiority of Lilly injectable obesity treatment, Novo appears to have the efficacy advantage in the oral market.
Trials show the Wegovy pill helps patients lose around 16.6% of their body weight which is more effective than Novo’s injectable version and Lilly’s oral pill.
Rival Lilly’s oral obesity pill Foundayo received FDA approval on 1 April and despite a strong start, prescriptions have lagged the take up seen for Novo’s pill.
One advantage for Foundayo which may prove pivotal is that it can be taken any time with or without food whereas the Wegovy pill must be taken on an empty stomach and 30 minutes before eating.
How does Novo Nordisk’s make money?
Uniquely Novo is controlled by the Novo Nordisk Foundation, through its holding company, Novo Holdings. This structure provides a stable, long-term ownership structure which prioritises research and development and sustainability over short term results.
Novo generates roughly two thirds of its revenue from selling GLP1 products to treat diabetes and obesity with most of the rest coming from selling insulin, and a small contribution from making drugs to treat rare diseases.
Insulin is a hormone which regulates blood sugar and the backbone of the company’s history. Novo is the world’s leading insulin maker with a market share of 50% followed by French company Sanofi and Eli Lilly. These companies hold a rough 90% share of the $27 billion global insulin market.
Patents play a key role in the pharmaceutical industry, typically giving companies 20-years of exclusivity on their inventions. When a product goes off-patent sales often slump due to competition from cheaper generics.
The ‘crown jewel’ patent for Novo is the active ingredient in its GLP-1 products, semaglutide. The primary patent was originally due to expire in the US in 2026, but patent extensions mean it is now protected until 2030.
In Europe and the UK the expiry date is 2031. Patents across China, India and Brazil expire in 2026.
What are GLP-1s?
Ozempic and Wegovy belong to a class of drugs called GLP-1s which stands for Glucagon-Like-Peptide-1. They mimic a protein naturally produced in the body which regulates blood sugar and appetite.
Patients taking GLP-1s feel less hungry between meals and more satiated after eating.
Novo’s active ingredient is semaglutide which mimics a single hormone while Lilly’s treatment is a combination therapy comprising a GLP-1 plus another hormone called a GIP (Gastric Inhibitory Polypeptide) which improves how the body breaks down fat.
Other pharmaceutical companies searching for next generation obesity drugs are testing triple action hormones combining GLP-1s, GIPs and Glucagon.
Common side effects of obesity drugs include like nausea, vomiting and other gastric issues which often prevent patients from staying on the medication.
Peer group valuation comparison
The company generates industry leading operating margins north of 40% which allows Novo to self-fund large capital expenditures such as the DKK 160 billion expansion manufacturing sites in Denmark and the US.
Novo has a long history of paying dividends, distributing between 40% and 50% of earnings per share. In 2026 the company launched a new DKK 15 billion ($2 billion) share buyback programme and since 2020 the company has returned over DKK 306 billion ($43 billion) to shareholders via dividends and share buybacks.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...
