sum up:

Novo Nordisk A/S is replacing Chief Executive Officer Lars Fruergaard Jorgensen as the drugmaker wrestles with increased competition for its Wegovy obesity shots that transformed the weight-loss industry and made the Danish company the star of corporate Europe.

The stunning and unprecedented move from a company known for its consensual culture follows a 53% decline in its share price over the past 12 months that has sliced more than $300 billion off its market value. Novo has faced setbacks in trials of new weight-loss drugs and growing inroads from Eli Lilly & Co.

“Considering the recent market challenges, the share price decline, and the wish from the Novo Nordisk Foundation, the Novo Nordisk Board and Lars Fruergaard Jorgensen have jointly concluded that initiating a CEO succession is in the best interest of the company and its shareholders,” the company said in a statement Friday.

Novo’s shares fell about 4%. Lilly’s shares rose 1.4% in premarket trading in New York following the news.

Jorgensen will continue as CEO “for a period to support a smooth transition to new leadership,” Novo said, adding the search for a new leader has begun.

Novo rarely changes its CEO. Many of its managers — including Jorgensen — have spent their entire careers at the company. Jorgensen’s predecessor, Lars Rebien Sorensen, who’s now joining the board in an observer role, had the top job from 2000 to 2016, while Mads Ovlisen was in charge from 1981 to 2000.

Jorgensen became CEO in January 2017 and the company’s market capitalization has more than tripled during his tenure. Novo was first to market with Wegovy and its sister drug Ozempic for diabetes, but it’s now ceding market share to Lilly, whose rival drug Zepbound has the lead in obesity prescriptions.
Novo Nordisk Shares Trail Obesity Rival Eli Lilly

Source: Bloomberg

NOTE: Data is normalized with percentage appreciation as of May 18, 2020.

In the past year, Novo has also struggled to convince investors it has a world-leading pipeline of next-generation weight-loss drugs. Novo repeatedly told investors its CagriSema shot, expected to be launched in 2026, would help people lose 25% or more of their body weight. Instead, the drug failed to live up to that expectation, and reaction from the markets was swift and brutal.

Read More: Novo’s Obesity Shot Shortfall Shows Danger of Promising Too Much

Last week, Novo also lowered its forecasts for sales and profit growth after sales of Wegovy fell short of expectations in the first quarter.

“Jorgensen’s surprise departure from Novo Nordisk corroborates the perception that the company has lost ground to Eli Lilly in the obesity space,” said Michael Shah, a Bloomberg Intelligence senior industry analyst. “This includes underwhelming results for CagriSema” as well as supply chain constraints and market challenges for Wegovy, he added.
‘Unchanged’ Strategy

The Novo Nordisk Foundation, which is the wealthiest non-profit foundation in the world, with assets of 1.06 trillion kroner ($159 billion), began the dialog with Novo’s board “on the merits of an accelerated CEO succession,” Novo said.

“We have a clear strategy, and that remains unchanged. There is nothing more behind this,” Novo’s Chairman Helge Lund said on an analyst call, after he was asked why the company had lost its usual patience.

Novo has been a key driver of Danish economy growth in recent years, significantly boosting export and job growth, while driving investments in facilities and research. However, its outsized role has sparked debate about the economic over-reliance, as the pharmaceutical giant’s performance increasingly shapes national financial indicators in the small Nordic economy.

Lars Hytting, head of trading at Artha Kapitalforvaltning, called the announcement a “bomb.” Artha is invested in Novo, and Hytting said he isn’t planning to either buy or sell based on the ousting.

“I’m very surprised,” he said. “I can definitely see that Novo is in a different place now than a year ago. But I had absolutely not expected that Fruergaard [Jorgensen] would be the one to leave. They just had their best quarter ever.”