Novo Nordisk announces 9,000 job cuts amid rising competition for Ozempic and Wegovy

Danish pharmaceutical giant Novo Nordisk announced Wednesday that it will cut 11 percent of its workforce, totaling 9,000 jobs worldwide, including 5,000 in Denmark, as it faces mounting competition in the global obesity treatment market.

The company said the layoffs will help it save eight billion kroner, or roughly USD1.3 billion, and are part of a broader "company-wide transformation to simplify its organization, improve the speed of decision-making, and reallocate resources towards the company's growth opportunities in diabetes and obesity."

This marks the third time this year that Novo Nordisk has lowered its earnings forecast. The company now expects operating profit growth of four to 10 percent, down from an earlier projection of 10 to 16 percent. Despite the news, the company’s share price rose more than three percent in midday trading in Copenhagen, indicating some investor confidence in its restructuring plan.

"Our markets are evolving, particularly in obesity, as it has become more competitive and consumer-driven. Our company must evolve as well," said Novo Nordisk chief executive Mike Doustdar.

He added, "This means instilling an increased performance-based culture, deploying our resources ever more effectively, and prioritizing investment where it will have the most impact, behind our leading therapy areas." Doustdar took over as CEO in August, succeeding Lars Fruergaard Jorgensen.

The layoffs come after a period of rapid expansion for the company. Novo Nordisk grew its workforce from 43,700 in 2020 to 78,400 today. The surge in hiring had contributed to Denmark's economic growth in 2023, but the company has faced a slowdown in sales as competitors, including US pharmaceutical giant Eli Lilly, introduce rival treatments.

Palle Sorensen, chief economist at Nykredit Bank, said the 5,000 domestic job cuts are "significant. The Danish economy created 2,300 new jobs in June. So it is approximately equal to two months of job growth."

Novo Nordisk also faces challenges from copycat versions of its drugs in the United States. The US Food and Drug Administration had temporarily allowed pharmacies to produce "compound" or generic versions of Ozempic and Wegovy, though that authorization expired on May 22. Novo Nordisk said sales of generic versions continue "under the false guise of 'personalization'."

Ozempic, initially developed as an anti-diabetic injectable treatment, gained popularity on social media for its slimming effects. Wegovy contains the same active ingredient as Ozempic at a different dose and is approved for weight loss. Both drugs use analogues of the hormone GLP-1, which regulates blood glucose levels and appetite.

"Analysts say management underestimated emerging competition and misjudged its own market position," said Jochen Stanzl, chief market analyst at CMC Markets. He added, "Investors who bought in at higher valuations are paying the price, as the stock now reflects fading hopes of a return to its earlier growth trajectory."

Novo Nordisk emphasized that its transformation plan reflects "the company's commitment to meet rising global demand while also competing in a more dynamic and consumer-driven obesity market, as evidenced by the recent slowdown in growth."