Novo Nordisk, the maker of the blockbuster weight-loss drug Wegovy, will cut 9,000 jobs or 11.5% of its workforce in a restructuring plan aimed at saving approximately $1.3 billion annually, as it faces increasing competition from U.S. rival Eli Lilly.
Last year, Novo was Europe’s most valuable listed company at one point. However, it is now encountering a critical moment as Wegovy and its diabetes treatment, Ozempic, are losing market share and sales growth is slowing, particularly in the United States.
The restructuring will simplify the company, enhance decision-making speed, and reallocate resources towards growth opportunities, as stated by the company on Wednesday.
“Our markets are evolving, especially in obesity, as they have become more competitive and consumer-driven. Our company must evolve as well,” said CEO Mike Doustdar, who assumed the role just last month, in the statement.
“This means instilling an increased performance-based culture, deploying our resources more effectively, and prioritizing investment where it will have the most impact – behind our leading therapy areas,” he added.
Nordnet analyst Per Hansen anticipated a positive reaction from Novo’s shares in response to the news.
“The savings plan is tough, natural, and very necessary at the same time,” Hansen stated. “Mike Doustdar needs to clear the decks so that Novo can move forward.”
Novo will report one-off restructuring costs of 9 billion Danish crowns in the third quarter, which include impairment charges, but it also expects 1 billion crowns of savings in the fourth quarter.
It anticipates annual savings of 8 billion crowns.
Novo, which currently employs a global workforce of 78,400, mentioned that about 5,000 of the job cuts will occur in its home country, Denmark. This decision follows a global hiring freeze for non-critical business roles implemented last month.
Operating profit growth for this year is now projected between 4% and 10%, down from the 10% to 16% range forecasted last month, due solely to restructuring costs.
“Sometimes the hardest decisions are the right ones for the future we’re building. I’m confident that this is the right thing to do for the long-term success of Novo Nordisk,” Doustdar expressed in a LinkedIn post.
The company expects significantly slower growth this year, partly due to compounders permitted to produce copycat medicines using the same ingredients as Wegovy, owing to shortages.
In July, investors wiped $70 billion off the drugmaker’s market value after Novo issued a profit warning and named company veteran Doustdar as the new CEO.
Its shares have declined nearly 46% since the start of the year, reducing its market value to about $181 billion as of Tuesday’s close, which is far below its peak valuation of around $650 billion last year.
