Dive Brief:

• Novo Nordisk on Wednesday announced plans to lay off about 11% of its workforce as competition for top-selling medicines Ozempic and Wegovy eats into its profits.
• The cuts will affect about 9,000 of the company’s 78,400 employees, with 5,000 of the jobs eliminated in Novo’s home country of Denmark. The drugmaker intends to move ahead with the layoffs immediately, working within local labor rules. 
• Novo expects the moves to save 8 billion kroner, or about $1.26 billion annually by the end of 2026. But one-time restructuring costs will reduce income this year, and Novo cut its operating profit growth estimate to between 4% and 10%, down from a previous forecast of 10% to 16%.

Dive Insight:

New CEO Mike Doustdar is moving quickly to revive profit growth at the company after taking over last month. Novo employees need “a shift in our mindset and approach so we can be faster and more agile,” he said in the statement announcing the layoffs. 

Novo’s introduction of semaglutide, sold as Ozempic for diabetes and Wegovy for obesity, revolutionized the treatment of obesity. The company began raking in billions of dollars in sales alongside Eli Lilly, which later won approval for a similar medicine in the GLP-1 class. But neither company could keep up with demand, and cheaper, compounded versions moved in to pick up the slack.

Although the shortages are over and the Food and Drug Administration has put legal restrictions on knockoff versions back in place, compounders have continued to market their products as “personalized” and are drawing market share away from Novo. The drugmaker’s attempts at fighting back, including more than 130 lawsuits, have so far had little effect on the bottom line.

Novo’s shares have lost more than half their value in a year, hurt by the increased competition and the resulting reductions in profit and sales guidance. The company has been working to shore up future growth by expanding the approved uses of its drugs and by looking outside for acquisitions and development deals.   

But ultimately, Novo has to evolve as it faces a “more competitive and consumer-driven” obesity market, Doustdar said. “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,” he said.