Novo’s New Chairman Urged to Curb Risk After Metsera Drama
Lars Rebien Sorensen
(Bloomberg) — The executive who brought Novo Nordisk A/S’s first weight-loss shot to market is coming back as chairman of the Danish drugmaker, and not all shareholders are happy about it.
Investors are meeting on Friday to elect Lars Rebien Sorensen to lead the supervisory board less than a week after Novo lost a bidding war with Pfizer Inc. The outcome is a foregone conclusion as the Dane, who ran the company for 16 years, also heads the Novo Nordisk Foundation, the controlling shareholder that holds 77% of Novo’s voting rights.
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Sorensen’s unprecedented power grab began less than a month ago, when a dispute over the pace of change at the struggling maker of the blockbuster drugs Ozempic and Wegovy led to more than half the supervisory board resigning.
Some of Novo’s prominent minority investors have rejected the revamp, including Norway’s sovereign wealth fund and CalSTRS, the pension fund for California educators. Influential proxy advisor Institutional Shareholder Services Inc. recommended that holders abstain, saying the overhaul shows “limited transparency and accountability to minority shareholders.”
These investors must now wait to see if Sorensen’s decision to gut the board and pin Novo’s recovery plan on himself and his aggressive and ambitious new chief executive officer, Mike Doustdar, is the right one.
The Sorensen-Doustdar duo has already made a high-profile, but ultimately unsuccessful, attempt to gatecrash Pfizer’s deal to buy the obesity biotech Metsera Inc. in a tussle so feverish it went all the way to the Oval Office, where Doustdar challenged Pfizer CEO Albert Bourla to raise his bid.
That kind of brinkmanship may be exactly what investors don’t want.
Novo needs to evaluate future deals more carefully “and definitely take much less risk than they did” with the Metsera pursuit, said Markus Manns, a portfolio manager at Union Investment in Frankfurt.
Union Investment is voting in favor of the board changes, according to Manns. A new lineup is needed because the old one is partly responsible for Novo’s past missteps, but the company now needs to come up with a “sound and sustainable” strategy for regaining market share from archrival Eli Lilly & Co. and diversifying its portfolio, he said. “What I don’t want are bold actions or risky deals.”
Experiment and Fail
Novo is facing an uphill climb in the obesity market after losing its lead to Lilly and disappointing with its next-generation experimental drug CagriSema. While rivals are moving forward with novel compounds, Novo’s next offerings are reworked versions of its existing drugs, putting Wegovy in a pill or in a higher-dose shot.
Sorensen’s elevation, almost a decade after he left the CEO job, gives him a second chance to reshape the drugmaker.
During his 16 years at the helm, Sorensen oversaw a 400% sales boost as well as the introduction of Saxenda, the precursor to Wegovy. But by the end of his tenure, Novo was facing an insulin price squeeze that hit both its profits and share price. His successor, Lars Fruergaard Jorgensen, captained the introduction of Ozempic and Wegovy and Novo’s vault into the top ranks of global drugmakers.
The company failed to capitalize on its first-mover advantage, but the brutal board restructuring still clashes with Novo’s usually consensual culture. The move “has caught many investors by surprise,” said Ketan Patel, a fund manager at the family office Whitefriars, which holds Novo shares. He called the shakeup and Sorensen’s assumption of the chairman role “unprecedented and unsettling” and said it showed the headwinds facing the business.
Novo declined to make Sorensen available for an interview before the shareholder meeting. In a session on leadership at a conference in Denmark in 2017, after he left Novo and joined the foundation’s board, the executive spoke broadly on his track record at the drugmaker and on his management philosophy.
Companies need to “experiment and fail,” he said. Scientists won’t give up on their projects, so it’s up to CEOs to decide if a potential new drug is ready for the market.
Gloves Are Off
“I’ve decided on some of the most spectacular failures we’ve made,” Sorensen said. “You have to try. You have to resource projects maximally so they have maximum progress, and then you have to evaluate on an ongoing basis and kill them fast.”
A similar ethos has been evident since Doustdar took over in August. The new CEO announced layoffs for 11% of the company, axed longtime pet projects such as an effort to cure diabetes using stem cells, and started the bidding war with Pfizer.
“The velvet gloves are off,” said Hanne Sindbaek, a Danish author who has written three books about Novo, in reference to the Pfizer bidding war. “Now they realize it’s a rough market, and we have to play rough.”
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