Novo Nordisk to Cut 9,000 Jobs and Lowers Profit Growth Forecast; Analysts See Positive Signals

TradingKey - On Wednesday, September 10, Danish pharmaceutical company Novo Nordisk (NVO), known for its obesity drugs Wegovy and Ozempic, announced a restructuring plan involving global job cuts of 9,000 employees and a third downward revision of its profit growth forecast this year. This move marks the first major initiative since the company appointed a new CEO last month.

The layoffs represent 11% of Novo Nordisk's current global workforce of 78,400 positions. Through this restructuring effort, Novo Nordisk anticipates achieving annual cost savings of approximately 8 billion Danish kroner by the end of 2026. Last month, the company had already instituted a global hiring freeze for non-essential positions.

Novo Nordisk expects the restructuring to incur a one-time cost of 8 billion Danish kroner, impacting this year’s profits and prompting a revision of its operating profit growth forecast to between 4%-10%. Back in May, the forecast was for 16%-24%, marking this as the third profit forecast adjustment this year.

The adjustment is primarily due to Novo Nordisk facing dual challenges. The company’s blockbuster obesity drug Wegovy is experiencing a significant sales slowdown as it faces stiff competition from Eli Lilly's Mounjaro and other cheaper generics in a highly competitive market. According to Bloomberg, Novo Nordisk has lost its leadership position, being overtaken by Eli Lilly. Additionally, the pharmaceutical industry is grappling with Trump's tariff policies in the United States.

Industry sentiment surrounding Novo Nordisk's outlook remains largely pessimistic. Bank of America predicts that Novo Nordisk will issue its 4th profit warning of the year when it reports Q3 earnings in November, expressing doubt that the company’s sales will reach the upper limit of current projections.

However, some analysts offer a more optimistic perspective. UBS argues that the workforce adjustment, following a period of significant growth, is intended to reduce organizational complexity. Soren Lontoft, a pharmaceutical stock analyst from Denmark's Sydbank, suggests that simplifying the organization will make the company more agile, enabling faster and better decision-making, which is a positive aspect. Lontoft also mentioned that the layoffs are not surprising, demonstrating the new CEO's resolve. Given the challenges in the US market and the prospects for slowed growth, the company’s actions appear justified.

Novo Nordisk's shares (NVO) have fallen by 36% this year, indicating eroding confidence in what was once hailed as "Europe's most valuable company." Following the layoff announcement, the stock saw a slight increase on Wednesday. UBS analysts recommend keeping an eye on the company's future clear growth strategies and profit timelines.