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Novo Nordisk Foundation has 77% vote share in Novo

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Foundation clashed with board over pace of change

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Current board chair, independent members stepping down

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Foundation chair set also to become Novo Nordisk chairman

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Novo is in fierce obesity drug battle with Eli Lilly ( LLY )

By Maggie Fick and Jacob Gronholt-Pedersen

LONDON/COPENHAGEN, Oct 24 (Reuters) - A boardroom

shake-up at Novo Nordisk has handed unprecedented power to its

top shareholder, the Novo Nordisk Foundation, rattling investors

despite calls for stronger leadership at the drugmaker behind

weight-loss treatment Wegovy.

Once Europe's most valuable firm thanks to its blockbuster

obesity drug, Novo Nordisk has stumbled in the last

year. Slowing sales and intensifying competition from U.S. rival

Eli Lilly ( LLY ) have eroded its market share and shaken

investor confidence.

The Novo Nordisk Foundation, which holds more than

three-quarters of the firm's voting shares, this week pushed out

Novo's board chairman and independent members for not acting

quickly enough to stem the decline in its key U.S. market.

Foundation chair Lars Rebien Sorensen - a former long-time

Novo chief executive - will also become the company board

chairman. The dual role is unprecedented in the firm's history.

Evan Seigerman, healthcare analyst at BMO Capital Markets,

said the move showed the Foundation - which says on its website

that it plays an "arm's length" role in the company - was in

full control, given its 77% vote share.

"That's carte blanche to do whatever they want," he said.

DUAL CHAIRMAN ROLE RAISES GOVERNANCE CONCERNS

The Novo Nordisk Foundation, established in 1989 though with

roots back to the 1950s, was set up to ensure financial and

strategic stability of the Novo Group while advancing scientific

research and humanitarian causes.

Foundation and incoming company chair Sorensen, who led the

company from 2000-2016, has publicly backed CEO Mike Doustdar, a

long-time company insider appointed in July.

"Doustdar has the steering wheel in his hands, but of

course he will have a board chairman who will look upon him with

very strict eyes," said Flemming Poulfelt, a professor emeritus

of management and strategy at the Copenhagen Business School.

Sorensen has said he plans to serve as chairman for 2-3

years.

Mikael Bak, head of the Danish Shareholders' Association

which he says has 17,000 members - a majority of them invested

in Novo - said the foundation ownership model needed an arm's

length approach and an independent board to support the CEO.

"What we need to make sure is that the Foundation and Novo

Nordisk is not mixed up," he told Reuters, calling for an

independent chairman to be installed within 18 months. "Our

message is that this has to be short."

Sorensen's dual role is being seen as a test of the

foundation-ownership model also used by other big Danish firms

like Maersk and Carlsberg.

Rajesh Kumar, an analyst at HSBC, said the foundation was

"not being unlike an activist investor", a break from the norm

where foundations usually gave more leeway to management.

"What we have is an unprecedented concentration of power,"

said Thomas Bernt Henriksen, a business columnist at Danish

newspaper Berlingske.

Both the Foundation and Novo Nordisk declined to comment.

'I'M GLAD THAT I'M NOT THE NEW CEO'

Novo's shares are down some 5% since the board shake-up,

extending a decline that has seen the stock lose two-thirds of

its value since a 2024 peak. Doustdar is now leading a sweeping

restructuring aimed at refocusing the company and cutting costs.

Even before the board upheaval, he faced a daunting

task. The company issued a profit warning on the day of his

appointment, triggering a share fall of as much as 30%. Within

months, he announced plans to cut 9,000 jobs, more than half of

them in Denmark.

"As a new CEO trying to find your space, I don't know. I'm

just glad that I'm not the new CEO," said a senior life sciences

executive in Denmark, asking not to be named.

Doustdar's public comments have echoed the urgency voiced by

Sorensen, who criticised the previous board for its sluggish

response to competitive threats. Investors have responded

positively to the restructuring plan, with Novo's shares up

since the announcement.

TIGHTER GRIP MAY BE ACCEPTED IN THE SHORT TERM

Sorensen's tighter grip on management has been welcomed by

some investors.

Markus Manns, a portfolio manager at Union Investment and

Novo Nordisk shareholder, said the company has made several

"strategic missteps" in recent years.

That included launching Wegovy without enough manufacturing

capacity, losing its first-mover advantage and underestimating

both the self-pay consumer segment and the risk from compounded

copycat drugs market in the U.S.

"The board cannot be given a good review on its performance

in overseeing Novo given the company's major strategic missteps

in the U.S.," agreed Claus Henrik Johansen, CEO of Global Health

Invest, a Danish healthcare investment fund.

Manns said a strong board could be a good thing, though Novo

ideally would also have a strong CEO to match it.

"We have to watch how the relationship plays out," he added.

"Governance is certainly an issue, but in the current situation

shareholders might accept this deficit temporarily."