‘Not desperate’: Novo Nordisk’s new boss defends strategy
Mike Doustdar says he has a ‘fantastic pipeline’ after losing battle for biotech Metsera
Just one month into his job, Novo Nordisk’s new chief executive went to bed one night in September thinking he had secured a $10bn takeover of obesity-focused biotech Metsera.
Mike Doustdar’s predecessor was ousted in May after the Danish drugmaker’s share price started to slide following a disappointing trial result for a next-generation drug.
Despite briefly regaining the crown of Europe’s most valuable company in June, the stock slide continued as the Ozempic and Wegovy maker lost share in the crucial US market. The move to buy Metsera looked like a new, bolder approach from a leader determined to fix Novo’s problems.
But when Doustdar woke up the following day in September, he discovered that Pfizer had clinched a deal despite only bidding $7.3bn. Metsera had decided that the US company’s offer was the safer bet because it was more likely to pass regulatory scrutiny.
“It became evident that Pfizer won this at a lower bidding price than we placed forward. That’s when I got very upset. I felt not in America, where there is free-market advocacy, shareholder value creation, that there’s just something unfair,” Doustdar told the Financial Times.
That frustration launched a nine-day takeover battle after Novo went public with a bid in late October, which will have lasting consequences for the company even though it eventually lost out.
Doustdar’s bold approach has divided shareholders. Some see it as refreshing and necessary to boost the share price, while others fear it could signal that Novo is desperate for deals and make future targets fear the attention of competition regulators.
Other people close to Novo worry that dealmaking could be a distraction from Doustdar’s most urgent task: rejuvenating sales in the US, where it is losing share to Eli Lilly and makers of replica drugs.
The Novo chief fought back against Pfizer, constructing an offer based on an unusual share structure, where Metsera shareholders would be paid the majority of the deal value before it was even put in front of regulators.
This prompted an unusual and bitter bidding war, where Doustdar goaded Pfizer to raise its bid during a press conference in the Oval Office. In the end, Pfizer won by matching Novo’s $10bn offer, as the Federal Trade Commission intervened to raise concerns about the potential merger.
The Novo chief said he had “no problem” with the outcome. “This time, when I lost, I didn’t feel like losing. I actually felt the Pfizer CEO and Pfizer board listened to my comments at the White House, and they put their hands in their pockets and raised the previous offer, and ultimately won fair and square,” Doustdar said.
Unusually for a large pharma company, Novo has tended to rely on its internal scientific research rather than mergers and acquisitions to build its cabinet of potential medicines. This began to change in 2020, when the company bought Corvidia Therapeutics for up to $2.1bn, while a big push into dealmaking came when it rehired David Moore to lead corporate development in 2022.
Novo is now looking for more targets, focusing on its core areas of obesity and diabetes. Doustdar is more willing to pick up the phone to the chief executives of potential targets and can make decisions more quickly than his predecessor, Lars Fruergaard Jørgensen. The former chief executive was just one of three people who had to sign off on deals previously, according to one healthcare banker.
Linden Thomson, a healthcare investor at asset manager Candriam, said Novo Nordisk needed to be more aggressive on deals. “For its share price, Novo needs a new pipeline asset, or multiple smaller ones, something to rally people around to say this is the opportunity for the future and that’s going to come from M&A.”
The market would reward Novo for being “bold”, said Paul Major, a healthcare-focused fund manager at Bellevue Asset Management, adding that now it should be looking at companies with earlier-stage obesity assets, such as Structure Therapeutics, which he owns.
Shares in many obesity-focused companies soared as Metsera’s valuation was bid up. Structure is up 47 per cent since the announcement of Pfizer’s first deal in September, while Viking Therapeutics has increased by 55 per cent. Healthcare bankers say that private companies Kailera Therapeutics and Verdiva Bio could also be possible targets.
Some investors would like Novo to look beyond these two narrow areas. Markus Manns, global portfolio manager and healthcare specialist at Frankfurt-based Union Investment, said the Metsera deal would have been the wrong way to invest shareholder money. “What I want them to do is diversify the company, not double down on injectable obesity [drugs],” he said.
He added that Metsera’s portfolio of potential drugs — which includes a long-acting injectable and a weight-loss pill — had so much overlap with Novo’s own that it would have raised questions about Novo’s confidence in its pipeline.
Doustdar said the Metsera deal was in some ways a “perfect fit” for his transformation plan for Novo Nordisk, and it was important not to be “arrogant”. “This ‘not invented here’ syndrome that companies get sometimes and Novo might have had in the past, doesn’t go down my alley very well,” he said. However, Doustdar insisted he was “not desperate — I have a fantastic pipeline”.
Candriam’s Thomson said that while Novo did need another obesity drug that would replenish sales after Ozempic and Wegovy lose patent protection early next decade, it could also look to buy companies in other areas where there are plenty of late-stage assets.
In October, the drugmaker signed a deal to buy Akero Therapeutics, which is developing a drug for a liver disease that is a common complication of obesity, for up to $5.2bn.
“Novo needs to diversify somewhat here. Akero was step one. Their data shows obesity is in the centre of so many conditions: sleep apnoea, liver problems, kidney problems, maybe Alzheimer's,” she said.
Looking outside obesity could also help address concerns about scrutiny from regulators. Novo said it was confident its strategy was legal and the structure would be accepted by regulators — but not all investors are convinced.
Manns said it would have been a “deep misjudgement” to assume that the FTC would accept this deal. Major said it was good that Novo did not raise its bid for Metsera any further because there were always going to be antitrust issues. “In Venn diagram terms, if you line up [the circles of] Novo and Metsera [the overlap] looks like a solar eclipse.”