By Maggie Fick and Jacob Gronholt-Pedersen
LONDON/COPENHAGEN (Reuters) -A boardroom shake-up at Novo Nordisk has handed unprecedented power to its top shareholder, the Novo Nordisk Foundation, rattling investors despite calls for stronger leadership at the drugmaker behind weight-loss treatment Wegovy.
Once Europe’s most valuable firm thanks to its blockbuster obesity drug, Novo Nordisk has stumbled in the last year. Slowing sales and intensifying competition from U.S. rival Eli Lilly have eroded its market share and shaken investor confidence.
The Novo Nordisk Foundation, which holds more than three-quarters of the firm’s voting shares, this week pushed out Novo’s board chairman and independent members for not acting quickly enough to stem the decline in its key U.S. market.
Foundation chair Lars Rebien Sorensen – a former long-time Novo chief executive – will also become the company board chairman. The dual role is unprecedented in the firm’s history.
Evan Seigerman, healthcare analyst at BMO Capital Markets, said the move showed the Foundation – which says on its website that it plays an “arm’s length” role in the company – was in full control, given its 77% vote share.
“That’s carte blanche to do whatever they want,” he said.
DUAL CHAIRMAN ROLE RAISES GOVERNANCE CONCERNS
The Novo Nordisk Foundation, established in 1989 though with roots back to the 1950s, was set up to ensure financial and strategic stability of the Novo Group while advancing scientific research and humanitarian causes.
Foundation and incoming company chair Sorensen, who led the company from 2000-2016, has publicly backed CEO Mike Doustdar, a long-time company insider appointed in July.
“Doustdar has the steering wheel in his hands, but of course he will have a board chairman who will look upon him with very strict eyes,” said Flemming Poulfelt, a professor emeritus of management and strategy at the Copenhagen Business School.
Sorensen has said he plans to serve as chairman for 2-3 years.
Mikael Bak, head of the Danish Shareholders’ Association which he says has 17,000 members – a majority of them invested in Novo – said the foundation ownership model needed an arm’s length approach and an independent board to support the CEO.
“What we need to make sure is that the Foundation and Novo Nordisk is not mixed up,” he told Reuters, calling for an independent chairman to be installed within 18 months. “Our message is that this has to be short.”
Sorensen’s dual role is being seen as a test of the foundation-ownership model also used by other big Danish firms like Maersk and Carlsberg.
Rajesh Kumar, an analyst at HSBC, said the foundation was “not being unlike an activist investor”, a break from the norm where foundations usually gave more leeway to management.
“What we have is an unprecedented concentration of power,” said Thomas Bernt Henriksen, a business columnist at Danish newspaper Berlingske.
Both the Foundation and Novo Nordisk declined to comment.
‘I’M GLAD THAT I’M NOT THE NEW CEO’
Novo’s shares are down some 5% since the board shake-up, extending a decline that has seen the stock lose two-thirds of its value since a 2024 peak. Doustdar is now leading a sweeping restructuring aimed at refocusing the company and cutting costs.
Even before the board upheaval, he faced a daunting task. The company issued a profit warning on the day of his appointment, triggering a share fall of as much as 30%. Within months, he announced plans to cut 9,000 jobs, more than half of them in Denmark.
“As a new CEO trying to find your space, I don’t know. I’m just glad that I’m not the new CEO,” said a senior life sciences executive in Denmark, asking not to be named.
Doustdar’s public comments have echoed the urgency voiced by Sorensen, who criticised the previous board for its sluggish response to competitive threats. Investors have responded positively to the restructuring plan, with Novo’s shares up since the announcement.
TIGHTER GRIP MAY BE ACCEPTED IN THE SHORT TERM
Sorensen’s tighter grip on management has been welcomed by some investors.
Markus Manns, a portfolio manager at Union Investment and Novo Nordisk shareholder, said the company has made several “strategic missteps” in recent years.
That included launching Wegovy without enough manufacturing capacity, losing its first-mover advantage and underestimating both the self-pay consumer segment and the risk from compounded copycat drugs market in the U.S.
“The board cannot be given a good review on its performance in overseeing Novo given the company’s major strategic missteps in the U.S.,” agreed Claus Henrik Johansen, CEO of Global Health Invest, a Danish healthcare investment fund.
Manns said a strong board could be a good thing, though Novo ideally would also have a strong CEO to match it.
“We have to watch how the relationship plays out,” he added. “Governance is certainly an issue, but in the current situation shareholders might accept this deficit temporarily.”
(Reporting by Maggie Fick and Jacob Gronholt-Pedersen in Copenhagen, additional reporting by Bhanvi Satija in London and Stine Jacobsen in Copenhagen; Editing by Adam Jourdan and Elaine Hardcastle)
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