Novo Nordisk $NVO ( ▼ 0.88% ) H1 2025 earnings were reported on Wednesday, August 6. However, hell broke loose last week when the company reviewed down its FY 2025 guidance (I will comment on the issue later on this newsletter) one week ago. Below you can find a very sharp review of Novo Nordisk PR release on the matter.

The stock price since then has plunged another 36%, from approximately 450 DKK/share to 289.5 DKK/share at close on the 2025.08.06 after H1 2025 earnings presentation.

DISCLAIMER: This article is not a recommendation to buy or sell any financial instrument, the content is educational and my personal opinion. Each person has to make his own analysis. Any action or decision you take as a result of viewing this article is your sole responsibility.

Podcast Generated from the Write-up

To give you more options to enjoy the write-up I have used Google NotebookLM to generate a podcast of the present write-up that you can listen to while running, during your commute or whenever you like.

The AI-generated podcast does a great job summarizing the article and making the content more accessible. However, it does not quote word-for-word the segments from the highlighted call transcript. Therefore, I recommend reading the original write-up to get the precise level of detail and profound insights.

Support Independent Analysis

This newsletter will always be FREE! If you’d like to help sustain it, consider buying me a coffee. With your contribution I will cover any annual costs I might incur and search for alternatives to enhance the experience.

Executive Summary

• Revenue Growth. Revenue increased +16.0% YoY (18.0% at CER), in H1 2025.

• Operating income growth outpaced sales once again, growing at 25% (28% at CER) due to ocedurenone impairment loss reported at the end of H1 2024.

• Diluted EPS reached 12.49 DKK per share, up +23% YoY.

• Lowered 2025 guidance for the 2^nd time this year due to competition from compounders! Sales growth is now expected to be in the range 8% - 14% at CER, with operating profit growth projected between 10% and 16% at CER. When reported in Danish kroner, sales and operating profit growth are anticipated to be 4% - 7% lower than at CER, respectively.

Income Statement

Revenue

Novo Nordisk reported its H1 2025, with revenue of DKK 159.4 million equaling a revenue growth of 16.0% YoY (18.0% at CER).

Gross margin during Q2 decreased to 83.3%, down -160 bps vs H1 2024 again caused by D&A expenses associated with Catalent, along with costs incurred from ongoing capacity expansions.

Product Revenue Distribution

Semaglutide based GLP-1 medication remained as the growth engine during H1 2025, particularly injectables. Rybelsus, oral semaglutide for diabetes, reported mid-single digit as injectables ramp-up was prioritized. Its downprioritization allowed semaglutide injectables to be removed from FDA shortage list last 22^nd of February.

Insulin sales increased by DKK 1.0 billion approximately despite lower volumes while the rare diseases segment reported mid double digit growth entirely driven by rare endocrine disorders debottlenecking.

Geographical Revenue Distribution

During Q1, USO growth slowed down compared to IO, 12% vs 14% respectively. However, growth at constant exchange rates for both was identical, reaching 18%.

US Operations (USO)

USO experienced a further slowdown in GLP-1 sales growth this quarter. Injectables performance was strong for another quarter: Ozempic sales grew +19% during the quarter while Wegovy sales increased +36% during the quarter vs 160% of the branded obesity market.

While Novo Nordisk reported that 46.5% of prescriptions of GLP-1’s for diabetes type 2 are of Novo Nordisk treatments, while the share of new-to-brand prescriptions amounts to 40.1%. In the GLP-1 obesity space, it was remarkable to hear that Wegovy prescriptions only represent10% of the cash channel ones due to unlawful compounding competition.

However, Victoza sales decreased -87% (Victoza contribution to USO sales is now <1%) while Rybelsus sales decreased (-18% YoY growth). As I anticipated during Q1 2025 earnings, Novo Nordisk decided to prioritize injectables which require less API per dose to fix manufacturing bottlenecks and get semaglutide out of the FDA shortage list. This has been confirmed during the earnings call that we will touch upon later on.

US insulin sales accelerated during Q1 2024, growing +23% year-over-year. Insulins were favored by gross-to-net adjustments related to prior years and channel and payer mix although realized volumes decreased.

Finally, rare diseases segment posted an impressive +52% sales growth vs Q2 2024 in the region thanks to rare endocrine disorders supply chain bottlenecks resolution.

FX impact in US Operations dragged sales 6% or one third of the underlying growth.

International Operations (IO)

IO experienced significant growth, primarily fueled by the continued launch of the weight-management medication Wegovy in additional countries, bringing the total number of markets to 35 (+10 countries vs Q1 2025). This strategic expansion has led to a dramatic increase in international Wegovy sales, which surged by an impressive +298% at CER during the quarter, rising from DKK 1,675 million in Q1 2024 to DKK 6,666 million.

Rare Diseases segment achieved double-digit growth in IO, growing a +14% YoY thanks to the segment expansion into new geographies, especially China.

Note: Remember that back in January 2025 Novo Nordisk removed Canada from North America Operations, moving it into International Operations geography so Canada is now reported within the EUCAN region.

Operating Income

Reported operating income reached DKK 33,440 million, equaling an operating margin of 43.5%, +440 bps vs Q2 2024. Diving into the operating expenses we can see:

1. R&D expenses: were DKK 11,690 million (-28% vs Q2 2024). Despite the cancellation of three research programmes (GIP/GLP-1 co-agonist, zalfermin, ANGPTL3i) the contribution to this huge reduction in R&D expenses comes from DKK 5.7 billion impairment loss of ocedurenone in Q2 2024. Normalizing it, Q2 2024 would have been DKK 10.5 billion, leading to a +11.6% growth YoY.

2. Sales & Distribution costs rose by 17% in Danish kroner and by 19% at CER, reaching DKK 17,563 million. QoQ acceleration is caused by lower launching activity in Q1 plus commercial efforts in initiatives such as NovoCare and partnerships with telehealth companies in the USA.

3. Administration costs rose by 14% to DKK 1,316 million, in line with the 13.0% in the number of full time employees vs Q2 2024.

Finally, it is remarkable how the rare diseases segment has surged from -26.4% in Q2 2024 to +10.5% currently as rare endocrine disorders output bottlenecks were solved. I expect this to be a tailwind up to +300 bps to the company’s operating margin in the coming years.

Net Income

Reported net income reached DKK 26,503 million (+32.0% YoY growth), benefitting from easier YoY comps. due to ocedurenone impairment loss the previous year.

Adjusting for the impairment loss impact, reported adjusted net profit growth was +10% vs Q2 2024 as a consequence of the larger interest expenses caused by Catalent’s acquisition.

Balance Sheet

Most remarkable development was the issuance of the € 6.0 billion eurobond in May 20, mainly dedicated to usual business practices and existing debt refinancing.

They are identical to the eurobond issued the year before: 2-year bond at a fixed rate of 3.375% issued across five tranches.

Cash Flow Statement

Capital Allocation

The company made the following investments:

1. Property, Plant & Equipment: DKK 28.1 billion, up +48.7% vs DKK 18.9 billion spent in H1 2024.

2. Intangible assets: Global collaboration and license agreement with Septerna Inc. “to discover, develop and commercialise oral small molecule medicines for key GPCR targets including GLP-1, GIP and glucagon receptors for the treatment of obesity, type 2 diabetes and other cardiometabolic diseases”. It includes an upfront payment of €200 million (DKK 1.49 billion) and up to € 2.2 billion euros (DKK 16.4 billion).

3. Payment of an interim dividend of 3.75 DKK per share, +7% vs 2024 interim dividend.

While management received approval at the 2025 Annual General Meeting to repurchase up to 10% of the company's equity, a new share buyback program has not yet been announced.

FCF Generation

Operating Cash Flow (OCF) was almost flat DKK 65,376 million in H1 2025 vs 64,817 million in H1 2024.

In the first half of 2024, Novo Nordisk’s positive working capital stood out as an unusual but significant contributor to the year's strong cash flow. This trend shifted in the first half of 2025, as interest payments surged to roughly nine times the previous year’s amount. However, this increase was mitigated by a substantial drop in tax expenses, which were reduced by half compared to the first half of 2024.

Reported Q2 2025 FCF was DKK 24.1 billion compared to DKK 36.3 billion from Q2 2024, down -33.6%.

Management Call & Guidance