Management Change at Novo Nordisk: Investors Are Uneasy!

Novo Nordisk A/S’s first weight loss drug manager is returning to the presidency of the Danish pharmaceutical manufacturer. However, not all investors are responding positively to this development.

Investors are gathering on Friday to vote for Lars Rebien Sorensen to be elected as chairman of the board, just a week after losing an auction battle with Pfizer Inc. The outcome is almost certain, as the Danish executive, who led the company for 16 years, holds 77% of the company's voting rights, including the chairmanship of the Novonordisk Foundation.

Sorensen's power play in management began due to issues arising from the fast production of popular drugs like Ozempic and Wegovy, leading to the resignation of more than half of the board.

Significant investors in Denmark, including some leading minority investors such as Norway's sovereign wealth fund and the California teachers' retirement fund, rejected this change. A prominent consulting firm, Institutional Shareholder Services Inc, indicated that the change offered limited transparency and accountability to minority investors, recommending shareholders not to vote.

Now, investors have to wait to see whether Sorensen's decision to restructure the board and adhere to a much riskier recovery plan alongside the new aggressive CEO Mike Doustdar is the right choice.

The Sorensen-Doustdar duo made a high-profile yet unsuccessful bid to acquire Metsera Inc. This competition escalated to the point where it reached the White House, with Doustdar facing off against Pfizer's CEO Albert Bourla on increasing the offer.

Such a challenge may be a situation investors are reluctant to accept.

Markus Manns from Union Investment stated that Novo should evaluate future deals more carefully and should not take as many risks as it did in the attempt with Metsera. While expressing support for the management change, Manns emphasized that the former management was partly responsible for past mistakes and that the company needs to develop a solid and sustainable strategy to regain its market share.

Novo faces a difficult process against Eli Lilly & Co in the weight loss market, having decided to reduce its workforce by 11% and terminate its long-standing projects, including efforts to use stem cells in Diabetes treatment. At the same time, it is under increasing pressure to restructure the drug supply and release new versions in the market.

Sorensen's return to duty signifies a second chance for reshaping Novo Nordisk, called upon after stepping down as CEO in 2017. During his management, he achieved a 400% increase in sales but faced sudden impacts that resulted in the end of his previous management period. Now, it remains to be seen how investors will respond to these potential developments.