Novo Nordisk shares are having their worst day in almost 40 years. The company downgraded its outlook again

Shares of Danish pharma giant Novo Nordisk, maker of popular weight-loss drugs Ozempic and Wegovy, suffered their worst one-day collapse since Black Monday in 1987 on July 29. The company unexpectedly -for the second time -cut its sales and earnings forecast amid weakening demand in the U.S. and pressure from copies of its drugs. Investors also reacted to the appointment of Novo's new chief by choosing an internal candidate over an external one, as analysts had expected. 

Novo Nordisk shares plummeted by 26% after the company unexpectedly lowered its annual sales and earnings forecast and announced the appointment of a new CEO. The stock recovered some of the fall by late afternoon, but still closed the session down 23%, suffering its worst collapse since Black Monday in 1987, MarketWatch notes. Since the beginning of the year, the value of Novo - once Europe's most valuable company -has fallen more than 42%. It is now not even in the top five. 

The pharma giant's American depositary receipts fell 21% to $54.71, the lowest in nearly three years, MarketWatch calculated.

Novo revised its full-year operating profit outlook to 10-16% from 16-24% at constant currency rates. The company attributed this to weaker sales growth expectations for the second half of the year for Wegovy and Ozempic in its key market, the U.S., due to widespread distribution of pharmacy copies. Novo estimates that sales growth in 2025 will be 8-14%, compared with 13-21% in its May forecast. And in May, the estimate was also reduced -for the same reason.

The company said on July 29 that despite an order from U.S. regulators to stop the practice of so-called compounding (making copies of drugs in pharmacies), it continues, with several manufacturers still selling generic versions of semaglutide, the main active ingredient in Wegovy and Ozempic. Novo added that it is taking various measures, including legal action, and called on federal and regional authorities to intervene.

Another announcement that disappointed the market was the appointment of the pharma company's "veteran" Maziar Mike Dustdar as its new CEO - after Lars Fruergaard Jorgensen was fired Lars Fruergaard Jorgensen amid a share collapse.  Investors had hoped Novo would be led by a highly skilled outsider who could mount a fresh challenge to its main rival, U.S.-based Eli Lilly, Bloomberg wrote. Shares in Lilly itself fell 5 percent in New York trading.

The Danish giant is struggling to convince investors that it can maintain its growth rate and compete with Lilly. The U.S. company has already proved that its Mounjaro and Zepbound drugs are more effective, and its promising portfolio of new developments looks stronger, notes WSJ.    

Dustdar has been with the company for more than 30 years, most recently serving as executive vice president of international operations, wrote CNBC. He said priorities will include the development of Novo's drug product line, innovation and investment, and said he plans to review spending. 

Novo Nordisk is unable to overcome negative sentiment after a series of disappointing results from clinical trials of its new experimental drug CagriSema. The drug enabled obese and type 2 diabetes patients to reduce weight by an average of 15.7% over 68 weeks, which was markedly worse than Novo Nordisk's own expectations - the company had previously predicted a 25% effect, reported CNBC. 

Amid data on weakening demand in the obesity drug market, Citi was optimistic about its outlook.  "We advise against drawing too hasty conclusions from Novo's outlook, as prescription data for tirzepatide (Lilly's drug) remained strong as of July 1, and Lilly's own forecast for 2025 may have been conservative. Therefore, we continue to recommend buying [Novo shares] amid the weakening" - commented Citi analysts in a statement to Investing.com.

JPMorgan is more cautious: "The downgraded outlook reflects revised expectations for Wegovy and Ozempic's growth rates in the second half of 2025." Nevertheless, analysts at the investment bank also reiterated their recommendation to buy Novo securities, according to Marketscreener.

"Analysts will start to question both short- and long-term expectations for the obesity treatment market, which has ballooned to unmanageable proportions," Jared Holtz, a health strategist at Mizuho Securities, warned Bloomberg.

The majority of analysts tracking Novo Nordisk securities - 21 out of 32 - advise investors to buy them (Buy and Overweight ratings), followed by MarketWatch. Another eight analysts recommend holding (Hold) and three recommend selling (Sell). The Wall Street consensus target price is $97 per paper, up 41% from current levels.

This article was AI-translated and verified by a human editor