Novo Nordisk (NYSE: NVO) shows first mover isn’t always first finisher
It seems only logical that companies who are the first to jump into an industry should perform the best. After all, these first movers have a head-start on whatever competitors emerge.
Examples include Coca-Cola (NYSE: KO), Netflix (NASDAQ: NFLX) and eBay (NASDAQ: EBAY). But first movers don’t always come out on top. Just look at Myspace, a social networking company usurped by Facebook (NASDAQ: META) in the late 2000s. And look at the Netscape Internet browser that was overtaken by Microsoft Explorer (NASDAQ: MSFT) in the late 1990s.
One first mover that appears to be struggling now is Novo Nordisk (NYSE: NVO). It surged to prominence after introducing its GLP-1 drug Ozempic for diabetes in 2017 and Wegovy for weight loss in 2021.
The company’s stock price soared 689% from Jan. 31, 2017 to June 30, 2024, dwarfing the 140% gain for the S&P 500. In 2023, it attained the highest market capitalization of any company in Europe.
Lilly joins the fray
But then Eli Lilly (NYSE: LLY) introduced its own GLP-1 medicines: diabetes drug Mounjaro in 2022 and Zepbound for weight loss the next year. From April 30, 2022 to May 30, 2025, Lilly shares jumped 153%, compared to just a 25% increase for Novo Nordisk. The latter has dropped 46% over the past year, and it’s now No. 2 in European market-cap behind software stalwart SAP (NYSE: SAP).
Several factors have stymied the company. First, Novo underestimated demand for Wegovy. A shortage of the drug led the Food and Drug Administration to approve compounding of GLP-1 drugs. That means legal, knockoff versions of the drugs at cheaper prices than the real thing. Customers have flocked to them.
“It became clear over the first quarter that the amount of business that had gone to the compounders was just significantly bigger than what we had anticipated,” Novo CFO Karsten Munk Knudsen told Barron’s. He thinks more than 1 million people in the US are using compounded GLP-1 drugs.
Reduced sales forecast
This trend has led Novo to cut its forecast for 2025 sales growth to 13%-21% from 16%-24% previously.
The FDA put a halt to production of compounded GLP-1s last month, with the shortage of Wegovy ending. But Knudsen said he isn’t seeing a shift away from the compounded versions yet and doesn’t expect a benefit for Wegovy sales until later this year.
Lilly too had some shortages, but was able to fix them more quickly than Novo. US prescriptions for Zepbound outpace those for Wegovy, according to The Wall Street Journal. That may continue: a recent study showed that Zepbound users on an average experienced a 20.2% weight reduction after 72 weeks, compared to 13.7% for Wegovy users.
There may be a cultural element to Novo’s problems. Hanne Sindbæk, who has written books about the company, told The Wall Street Journal there is tension in Novo between those who want it to focus on the common good and those who think the sole focus should be making money.
In any case, Novo’s plight shows that the first mover isn’t always the first finisher.
