How Ozempic maker Novo Nordisk blew its lead -3-

And people liked working there. "They value their people. They value more than just profit," said one of the former Novo employees. "It's a genuine place to be. I worried about going into Big Pharma and feeling evil. Novo felt wonderful. It was so focused on patient care, on science."

But there is little professional or educational diversity of any kind at the top, according to a former Novo executive. Many company leaders went to the University of Copenhagen medical school or business school or were recruited from the Danish shipping giant Maersk or the management consulting firm Accenture Denmark. They rarely come from the specialized and heavily regulated global biopharma industry, the former executive said.

"I got the sense that there was a culture that wasn't rewarding performance. It was rewarding just showing up," said Seigerman, the BMO Capital analyst. "Decisions were just taking too long to be made, and they weren't able to pivot."

Novo did not respond to requests for comment about its culture.

The company notably failed to protect the patent for semaglutide in Canada, where generic versions of the drug became available this spring. The way field teams were structured in the U.S. also confused some physicians, former Novo employees said. Those doctors would get requests for meetings from several Novo representatives about different indications rather than having one point of contact. In one U.S. region, there were more than four people from Novo setting meetings with doctors and providers, compared with only two from Lilly.

"We were crawling all over each other," the former Novo staffer said.

Mike Doustdar is the first Novo Nordisk CEO who is not Danish.

Doustdar is now shaking up the company. Born in Iran, he grew up in the U.S. and has worked at Novo for more than two decades, mostly in Europe. He has joked about his experience working for an American company - a grocery store in Ohio - as a teenager, according to former Novo employees. He isn't fluent in Danish. A Novo spokesperson did not comment about the grocery-store experience and pointed out that the company's official language has been English since 2012.

Under Doustdar, Novo wants to be faster, especially in its approach to selling the Wegovy pill. "Companies that transform are the ones that survive," he told the Journal podcast. Last month, Novo sued Lilly over what it says are deceptive ads that don't reflect the newest clinical data for Wegovy and Ozempic. In response, a Lilly spokesperson said: "Rather than compete on the merits of its products, Novo is asking a court to stop Lilly from communicating the results of that trial."

The layoffs and litigation are a shift from the Novo Nordisk way. An anonymous rapper who goes by Big Mike Style began posting songs last September, the same month layoffs were announced. "Are we safe this quarter? Hell no!" he raps. "Big Mike with the plan."

The company has had a recent series of stock-moving disclosures, including the failure of a brand-new heart drug in a Phase 3 trial and lower-than-expected sales of the Wegovy pill in the second quarter. Novo disclosed on Tuesday that it now expects little to no revenue growth this year, and Doustdar was blunt during an investor call, saying that "2026 continues to be a challenging year for Novo."

Seigerman said the real question is what kind of company Novo will become under Doustdar. He expects to find out at an investor meeting in September. "He better have some big reveal of some strategy that is really comprehensive around what he wants his company to be," Seigerman said. "It can't just be the status quo, and I think he gets that."

European competitiveness

Novo remains one of the few examples of a European company that is competing at the highest levels of global business.

In other advanced fields, European companies are almost absent. In technology, apart from the Dutch semiconductor equipment maker ASML and the German database software firm SAP, Europe is barely on the same playing field. The European Parliament just switched its default search provider to a French service, called Qwant, to reduce reliance on American technology - but the search engine turns to Microsoft Bing for much of its results. European car companies have increasingly been pushed to the periphery.

Europe used to lead the pharmaceutical business, and while it's still a considerable player, counting AstraZeneca, GSK, Novartis and Roche, its grip is slipping.

In 1990, European drug companies invested far more than American companies, accounting for 49.1% of global research and development, compared with 33.3% in the U.S., according to the Information Technology and Innovation Foundation. U.S. companies are now responsible for 55% of drug R&D, compared with 29% for European drugmakers. And U.S. companies now produce 47% of new drugs, versus 22% for European companies.

In his landmark report in 2024 on European competitiveness, Mario Draghi, the former European Central Bank president and Italian prime minister, cited several factors behind the pharmaceutical industry's struggles, among them less spending on R&D at both the public and private level in Europe than in the U.S. and limited use of health data - which is key for using artificial intelligence to speed up drug discovery - due to tough European privacy rules.

"There is the European Union, but there's not a single market for selling drugs," noted Craig Garthwaite, director of the program on healthcare at Northwestern University's Kellogg School of Management. "That lack of demand, and the lack of a common, fluid labor market - certainly post-Brexit - can inhibit the growth of really good companies that are innovative because they can't pull on as many resources."

And Europe now has to keep an eye on a third rival: China. Diederik Stadig, an economist at ING Research, said that Chinese R&D expenses surged between 2010 and 2022 by some 21% per year, and China has now surpassed Europe in the percentage of clinical trials under way.

The next Pfizer will be Chinese, Stadig predicts, at the expense of Europe, which is suffering from relative lack of scale, shallow capital markets and slower innovation.

Northwestern's Garthwaite makes another point. Both the U.S. and China have centers of excellence - places like Cambridge, Mass., and South San Francisco in the U.S., or Zhongshan Life Sciences Park and Shanghai's Zhangjiang Science City in China. "That level of agglomerated industry working together," he said, "you don't see that in Europe."

Even with Europe's disadvantages, experts said the region still has a solid foundation in biopharma and other industries such as engineering. It just has to find a way to get its swagger back.

-Jaimy Lee -Steve Goldstein

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

08-05-26 1253ET