Novo Nordisk A/S (NOVO:CA) Q4 2025 Earnings Call Transcript

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Overview

The earnings call summary indicates a generally positive outlook. The financial performance shows growth in revenue and EBITDA margins, driven by a strong pharma business and AI investments. However, there is some uncertainty in market conditions affecting client budgets. The Q&A section reveals management's confidence in product differentiation and market expansion strategies, despite competitive pressures. The company's strategic investments in AI and marketing, along with optimistic revenue and EBITDA guidance, suggest a positive sentiment. Despite some uncertainties, the overall tone is optimistic, leading to a positive prediction for stock price movement.

Key Financial Performance

Sales and Profit Sales and profit more than doubled over the last 5 years, adding DKK 76 billion to obesity care. Rare diseases grew by 9% last year due to new launches and increased focus.

Growth in 2025 Achieved 10% growth overall, with 8% growth in the U.S. and 14% in international operations. China underperformed due to restrictions on promoting Wegovy for obesity in e-Health channels.

Obesity Market The market doubled, and Novo Nordisk captured 31% growth, with 73% growth in international operations and 15% in the U.S. due to new launches of Wegovy.

Wegovy Pill Launch Achieved 16.6% weight loss compared to competitors' 12.4%. 50,000 new prescriptions in the U.S. within the first month, translating to 170,000 patients.

Net Profit and Cash Flow (2025) Delivered DKK 100 billion in net profit and DKK 120 billion in cash from operations. Capital allocation included DKK 60 billion in CapEx, DKK 30 billion in BD/M&A, and DKK 53 billion in dividends.

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Operating Highlights

Mim8 and etavopivat launches: Novo Nordisk is excited about the launch of Mim8 and etavopivat, which are part of their revamped rare diseases portfolio.

Wegovy pill: The Wegovy pill has shown exceptional performance in its first month, with 50,000 new prescriptions and 170,000 patients in the U.S. It offers a 16.6% weight loss benefit, outperforming competitors.

Pipeline developments: Novo Nordisk is focusing on diabetes and obesity treatments, with multiple readouts and regulatory decisions expected in 2026 for products like cagrilintide, semaglutide, and others.

Obesity market growth: The obesity market doubled, and Novo Nordisk captured 31% growth, with 73% growth in international operations and 15% in the U.S.

China market challenges: Wegovy faced challenges in China due to restrictions on promoting obesity-only products in e-Health channels, giving competitors an advantage.

Sales and profit growth: Novo Nordisk doubled its sales and profit over the last five years, adding DKK 76 billion to its obesity care segment.

Cash conversion and capital allocation: In 2025, Novo Nordisk achieved DKK 120 billion in cash from operations, allocated DKK 60 billion to CapEx, DKK 30 billion to BD/M&A, and DKK 53 billion to dividends.

Focus on innovation: Novo Nordisk is prioritizing innovation in diabetes, obesity, and rare diseases, with a strong pipeline and upcoming regulatory approvals.

Adjusted financial measures: The company introduced adjusted financial measures to account for a $4.2 billion noncash impact in Q1 2026, ensuring fair evaluation of business performance.

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Risk or Challenges

China Market Performance: The company's performance in China fell below expectations due to restrictions on promoting obesity-specific products like Wegovy in e-Health channels. Competitors like Mounjaro, which cater to both diabetes and obesity, have an advantage in this market.

Obesity Market Competition: The company faces intense competition in the obesity market, particularly from competitors like Lilly and compounders. The injectable franchise has struggled due to perceived lower weight loss compared to competitors.

Regulatory and Pricing Challenges: The company is experiencing pricing pressures in the U.S. due to a higher proportion of cash business and rate enhancements on the insured side. Additionally, extraordinary effects like LOE in international operations and MFN impact in the U.S. are expected to negatively affect top-line growth.

Pipeline and Innovation Risks: While the company has a robust pipeline, there are risks associated with the success of new product launches and regulatory approvals, such as the Zeus trial for ziltivekimab and the Phase III readout of etavopivat for sickle cell disease.

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Guidance & Outlook

Wegovy Pill Performance: The Wegovy pill has exceeded expectations in its first month, achieving 50,000 new prescriptions in the U.S., translating to 170,000 patients. It is expected to perform well due to its superior weight loss results (16.6%) compared to competitors (12.4%) and its cardiovascular benefits.

Pipeline Developments for 2026: 2026 will see significant developments in diabetes and obesity treatments, including readouts and initiations for cagrilintide, semaglutide, CagriSema, amycretin, and two tritagonists. Regulatory decisions and readouts for ziltivekimab, Mim8, and etavopivat are also anticipated.

Capital Allocation and Investments: In 2025, DKK 60 billion was allocated to CapEx for manufacturing capacity, DKK 30 billion for BD/M&A, and DKK 53 billion for dividends. For 2026, continued investments in growth, CapEx, and BD are planned, alongside a DKK 15 billion share buyback program.

2026 Financial Outlook: Revenue is expected to decline by 5% to 13% due to extraordinary effects, including LOE in international markets, MFN impacts in the U.S., and declining prices. Despite volume growth and more patients, price effects will outweigh these gains. Adjusted measures are introduced to account for a $4.2 billion noncash provision reversal in Q1 2026.

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Shareholder Return Plan

Dividend payout for 2025: DKK 53 billion

Dividend per share increase: 30 consecutive years of increase

Dividend payout ratio: 50%

Share buyback program: DKK 15 billion initiated in 2026

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Key Q&A

Q:What metrics are available on current levels of awareness in the U.S. for the oral Wegovy launch?

A:The company has gone all-in with advertising, including a Super Bowl ad and extensive campaigns in places like Boston and New York Central Station. They aim to leverage the first-mover advantage and demonstrate the nonissue of 30-minute dosing flexibility. 88% of patients are new, and most are buying the 1.5 mg dose. Financial efforts are significant, but specific numbers were not disclosed for competitive reasons.

Q:What is Novo Nordisk's perspective on price declines in the U.S. market compared to Lilly's mid-teens price decline guidance?

A:Novo Nordisk acknowledges price declines for GLP-1s in diabetes and obesity, with historical declines of 10%-15%. For Wegovy injectable, there is a substantial price reduction, but specific guidance on price and volume was not provided, unlike Lilly.

Q:What is the filing strategy for Wegovy pill outside the U.S.?

A:Novo Nordisk has filed for regulatory approval in the EU and U.K. They do not count individual countries within the EU but emphasize the need for FDA or EMEA approval before filing in emerging markets.

Q:What is the strategy for addressing the gentle decline in Ozempic scripts in the U.S.?

A:Novo Nordisk plans to revitalize the Ozempic brand by introducing Rybelsus in a different way and launching Ozempic 2.0 in more markets. They also aim to leverage their weekly insulin product in more markets.

Q:What are Novo Nordisk's thoughts on competition and growth in international operations, particularly regarding Mounjaro?

A:Novo Nordisk acknowledges the competitive spillover effect of Mounjaro's preference share in the U.S. to international markets. They aim to counter this with the launch of 7.2 mg Wegovy in the U.S. and its subsequent global impact. They also emphasize the importance of dose mechanisms and the differentiated benefits of their products.

Q:How does Novo Nordisk view price elasticity and the impact of price reductions on volume growth?

A:Novo Nordisk believes price is a significant factor in unlocking volume. The $149 price point for Wegovy pill has led to 15x more patients in the first month compared to the Wegovy injectable launch. They view the price reduction as a short-term investment for medium-term volume growth.

Q:What are the key factors affecting Novo Nordisk's margin guidance despite aggressive top-line growth?

A:The margin guidance reflects price-driven top-line decline, offset by disciplined resourcing and lower CapEx. Savings are achieved through budget cuts in non-priority areas while increasing investment in top priorities like R&D.

Q:Why was Novo Nordisk's guidance released the night before instead of earlier?

A:The guidance was released immediately after Board approval due to material deviation from market expectations. The delay was attributed to the dynamic nature of the obesity market and the need for the latest data and scenario analysis.

Q:What is the duration of the opportunity for the oral Wegovy pill given its patent timeline?

A:The compound LOE is the same for oral and injectable forms, but the tablet formulation has longer IP protection into the late 2030s.

Q:How does Novo Nordisk approach M&A in obesity versus diversification into other areas?

A:Novo Nordisk views obesity as a diversified therapy area with multiple segments. They aim to address different patient needs with various products and price points, emphasizing the breadth of their portfolio and long-term business strategy.

Q:How does Novo Nordisk ensure the obesity market does not become a race to the bottom in pricing?

A:Novo Nordisk focuses on segmentation, scaling, and portfolio breadth. They aim to differentiate products by addressing specific patient needs and leveraging their commercial expertise to create value in both high-volume and high-value segments.

Q:What is the profile of patients starting on the oral Wegovy pill, and how does this align with expectations?

A:88% of patients are new and start with the 1.5 mg dose, indicating market expansion rather than maintenance. This aligns with expectations of the pill being a market expander, especially for patients averse to injections.

Q:How does Novo Nordisk's guidance compare to Lilly's, and what are the underlying assumptions?

A:Novo Nordisk's guidance reflects uncertainties in the obesity market, including channel mix, sourcing, and cannibalization. They are confident in the Wegovy pill's competitiveness but acknowledge the dynamic nature of the market and the assumptions involved in modeling.

Q:Review of Unclear Management Responses

A:Management avoided providing specific financial details on advertising spend for the Wegovy pill launch, exact pricing strategies for future products, and detailed guidance on price and volume metrics. They also did not clarify the exact impact of the 7.2 mg Wegovy launch on global markets or provide precise timelines for volume growth following price reductions.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

DOCS Transcript

Novo Nordisk A/S (NOVO:CA) Q4 2025 Earnings Call Transcript

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