Novo Nordisk reports second quarter earnings missing Wall Street estimates on slower GLP-1 sales

Novo Nordisk (NVO) shares declined premarket after the company reported a Q2 earnings miss, with revenue of $11.95 billion against $11.97 billion expected and EPS of $0.93 versus $0.95 estimates, following a recent downward revision to its 2025 guidance and 2024 sales growth outlook. Key headwinds include significant impact from compounded semaglutide knockoffs, leading to over 130 lawsuits, intense competition from Eli Lilly capturing 60% of new GLP-1 prescriptions, and impending Medicare price negotiations, compounded by recent pressure from President Trump regarding Medicaid pricing.

Analysis

Novo Nordisk's second-quarter performance, marked by a slight miss on both revenue ($11.95 billion vs. $11.97 billion expected) and EPS ($0.93 vs. $0.95 expected), confirms that escalating headwinds are beginning to impact its growth trajectory. This follows a recent and significant reduction in the company's 2024 sales growth guidance from 13%-21% to 8%-14%. While year-over-year sales grew 16%, driven by $7.9 billion in revenue from its GLP-1 drugs Ozempic and Wegovy, this growth is being undermined by several factors. Management explicitly cited the widespread use of unauthorized compounded semaglutide, with an estimated one million users on 'knockoffs,' as a primary cause for the muted results, prompting the company to file 132 lawsuits. Simultaneously, competitive pressure from Eli Lilly is intensifying, with LLY capturing approximately 60% of new patient prescriptions, eroding Novo's market leadership despite its exclusive formulary deal with CVS. Finally, the company faces significant future pricing risk from upcoming Medicare negotiations and political pressure to lower its prices for Medicaid patients.

Key Decisions for Investors

• Investors should recognize that the combination of intense competition from Eli Lilly, the proliferation of compounded drugs, and mounting pricing pressure is now tangibly impacting financial results, as evidenced by the Q2 miss and reduced full-year guidance.
• Closely monitor the outcomes of Novo's 132 lawsuits and any shifts in market share for new prescriptions, as these will be critical indicators of the company's ability to defend its GLP-1 franchise.
• The impending Medicare price negotiations and political demands for lower drug costs constitute a significant overhang, and positions should be managed with an awareness of this heightened regulatory and pricing risk.