Novo Nordisk cut its full-year sales and profit forecasts for the second time this year.
👉 Background: Novo Nordisk is a Danish pharmaceutical company that’s been around since 1923. In late 2017, Novo Nordisk received FDA approval for its diabetes drug called Ozempic. While it helped people manage Type 2 diabetes, it also helped people lose a heap of weight and led to the launch of a specific weight-loss drug called Wegovy. These medications made Novo Nordisk the most valuable company in Europe… for a hot minute last year.
👉 What happened: Late last week, Novo Nordisk cut its full-year sales and profit forecasts for the second time this year. Next minute: Investors spat out their green juices in shock and as a result, its shares fell 30% (and wiped more than €60 billion from its value).
👉 What else: Weight loss drugs in the US are growing faaaast, but Novo Nordisk’s growth isn't quite growing at the rate expected by investors. Their brands are under pressure from competitors like Eli Lilly. So, it seems like the competitive moat held by Novo Nordisk is no longer moat-ing.
What's the key learning?
💡A competitive moat is a company’s ability to maintain its edge over rivals. For example, it can be built on being the first mover in a market, or it could be based on IP, like patents, and even the effort and cost of switching.
💡Novo Nordisk once had a strong moat with Wegovy and Ozempic. These drugs were early, effective and had its own IP. But moats can shrink especially when rivals like Eli Lilly rock up with newer drugs that supposedly work better.
💡In Novo’s case, its moat was weakened by two main threats:
So while Novo was once the poster child of the weight-loss revolution, it’s now being beaten in the very race it helped start.
Sign up for Flux and join 100,000 members of the Flux family
