Is this the "Novo Way" up?

It’s a business strategy that sounds straight out of Nathan For You: Just shorten your name.

Today, the pharmaceutical giant Novo Nordisk announced that it will go by “Novo” from now on, though it will keep its full name legally. The name change comes with a rebrand, too: The company is revising the mandates that make up the “Novo Way”—its internal set of corporate guidelines—to refocus on speed, competitiveness, and customers.

That may sound like corporate gobbledygook, but shareholders seemed moderately bullish on the move: Novo rose 0.87% today. The announcement comes ahead of the company’s capital markets day next week, in which new CEO Mike Doustdar will give investors a blueprint of how he plans to turn the struggling pharma giant around.

But we wouldn’t get too excited—historically, when a company changes its name, it’s usually a sign of trouble. According to research by quant analyst Alexander Hübbert, companies that arbitrarily change their names underperformed peers by more than 5% over the next year, the Wall Street Journal reported last week.

Novo’s woes

Changing its name isn’t Novo’s first attempt at winning back market share—and it likely won’t be the last.

The company enjoyed breakout success with Ozempic, the first of the uber-popular GLP-1 drugs, followed by Wegovy. But after a series of supply chain bungles, Novo gave up its lead to Eli Lilly, who zoomed ahead with its own slate of GLP-1 drugs. Novo is still struggling to regain ground: In the last year, shares of the company have plummeted 20.82%, while Eli Lilly soared 50.54%.

Despite getting FDA approval to launch its own oral GLP-1 medication, analysts are still skeptical of Novo’s ability to crawl out of the hole. “The Novo Nordisk bull case rests on 1) the oral market representing a larger volume share of obesity than consensus expects, and 2) Novo capturing a larger share of the oral opportunity vs. market expectations; however our survey only suggests a moderate expansion of the oral category over the next 18 months,” explained Morgan Stanley equity analyst Terence Flynn in a note on Friday. “[The] latest US prescription data also implies a slowdown of Wegovy Pill growth,” he added.

Last year, Novo laid off over 11% of its workforce, removed its CEO, and replaced its Board of Directors. But hey, maybe a new name will be the real beginning of a new era.—LB