Novo Nordisk A/S is replacing Chief Executive Officer Lars Fruergaard Jorgensen as the drugmaker wrestles with increased competition for its Wegovy obesity shots that transformed the weight-loss industry and made the Danish company the star of corporate Europe.
The stunning move from a company known for its consensual culture follows a 53% decline in its share price over the past 12 months that has sliced more than US$300 billion off its market value. Novo has faced setbacks in trials of new weight-loss drugs and growing inroads from Eli Lilly & Co.
“Considering the recent market challenges, the share price decline, and the wish from the Novo Nordisk Foundation, the Novo Nordisk Board and Lars Fruergaard Jorgensen have jointly concluded that initiating a CEO succession is in the best interest of the company and its shareholders,” the company said in a statement Friday.
Novo shares fell about 4% in midday trading Friday. Lilly shares rose 1.4% in premarket trading in New York following the news.
Jorgensen will continue as CEO “for a period to support a smooth transition to new leadership,” Novo said, adding that a search for a new leader has already begun.
Novo has had only three CEOs since 1990, and many of its managers — including Jorgensen — have spent their entire careers at the company. Jorgensen’s predecessor, Lars Rebien Sorensen, who’s now joining the board in an observer role, had the top job from 2000 to 2016 while Mads Ovlisen was in charge from 1981 to 2000.
Jorgensen has been with Novo since 1991 and was appointed CEO in January 2017. The company’s market capitalization has more than tripled during his tenure.
The Novo Nordisk Foundation started a dialog with Novo’s board “on the merits of an accelerated CEO succession,” Novo said, adding that the move was a joint decision.
The organization is the wealthiest non-profit foundation in the world, with assets of 1.06 trillion kroner (US$159 billion), according to the latest annual report. This is about twice the size of the Gates Foundation.
Novo was first to market with Wegovy and its sister drug Ozempic for diabetes, but the Danish company has ceded market share to Lilly. Its rival drug Zepbound now has the lead in obesity prescriptions, and Lilly’s diabetes version of the drug, Mounjaro, is on track to catch up with Ozempic as well by next August, according to BMO Capital Markets.
Lars Hytting, head of trading at Artha Kapitalforvaltning, called the announcement a “bomb.” Artha is invested in Novo, and Hytting said he isn’t planning to either buy or sell based on the ousting.
“I’m very surprised,” he said. “I can definitely see that Novo is in a different place now than a year ago. But I had absolutely not expected that Fruergaard [Jorgensen] would be the one to leave. They just had their best quarter ever.”
With assistance from Sanne Wass, Paul Jarvis and Christian Wienberg.
Naomi Kresge, Bloomberg News
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