In this episode, Scott Becker discusses how Novo Nordisk’s once-explosive profits are being challenged by increased market competition and reduced growth forecasts, leading to a sharp stock decline.
Chapter 1: What challenges is Novo Nordisk facing with excess profits?
This is Scott Becker with the Becker Business Podcast, the Becker Private Equity Podcast. Today's discussion is Novo Nordisk and excess profits.
So here's the rule in business. If there's any time that you're in a business that's hitting excess profits, and Novo Nordisk, Eli Lilly, a couple other companies were certainly in that spot for some time, then at some point, people are going to come after those profits in different ways. And Novo Nordisk is no exception to that.
Chapter 2: How has market competition affected Novo Nordisk's stock performance?
People think sometimes that patents will be exceptions to that, that other things will create moats around that and so forth. But generally, if you're having excess profits, others are going to come after you.
And that's what's happened with Novo Nordisk. They've cut their expected full-year sales growth to 8% to 14%, down from 20% or so. Their stock has fallen about 20% today. It's down more than 20% today. Their main weight loss drug is Letgovi, but they're basically seeing themselves splash their forecast and sales and profit forecast for that.
They had, for the last few years, just knocked it out of the box, Novo Nordisk.
Chapter 3: What changes have been made to Novo Nordisk's sales growth forecasts?
But as in all businesses, if you're making excess profits, you better figure out if they're sustainable or not.
It's another example that when you're going after stuff and you've got this great excess profits, that other parties are going to come after you and try and eat into that as well. They're seeing a lot of that. They're aggressively cutting their profits.
forecast, the stock is down more than 50% over the past year as they faced increased competition from others like hims and hers, Eli Lilly and others.
Thank you for listening to the Becker Business Podcast, the Becker Private Equity Podcast. If it's going too well, it's likely going too well, and you better do your risk at some point. Thank you for listening.