Novo Nordisk’s parent to buy Catalent to boost Wegovy supply

Novo Nordisk notched a win on Monday in its race to boost output of its popular obesity drug Wegovy, with its parent company announcing it was buying Catalent, a key manufacturing subcontractor of the product, for $16.5 billion.

Kasim Kutay, CEO of Novo Holdings, told Reuters the deal is core to his company’s strategy to support Novo Nordisk and enable the drugmaker to expand fill-finish capacity to meet soaring demand for Wegovy.

Novo Holdings, the investment arm of Novo’s controlling shareholder, the Novo Nordisk Foundation, will buy Catalent’s shares for $11.5 billion before including debt.

After the deal closes, Novo Holdings will sell three of Catalent’s fill-finish sites — in Anagni, Italy; Brussels, Belgium; and Bloomington, Indiana — onto Novo Nordisk for $11 billion. Novo Holdings owns 76.9 percent of the voting shares in the Wegovy maker.

That capacity is a “key strategic consideration for Novo Nordisk particularly when (…) making sure there is broader rollout for Ozempic and Wegovy,” Kutay said.

Novo Nordisk’s shares rose 3.63 percent in Copenhagen, while Catalent’s shares rose as much as 10 percent to a more than nine-month high in New York.

Novo faces competition from U.S. rival Eli Lilly’s injection Zepbound in the fast-growing obesity drug race. Analysts have estimated the market could be worth as much as $100 billion by the end of the decade.

Runaway demand for the highly effective drugs has sent profits and share prices for both Novo and Lilly soaring. But a major hurdle for both companies is ramping up production.

A bottleneck for Novo has been the need to expand capacity to fill injection pens — a process known as fill-finish — that must be done under sterile conditions.

Catalent’s Belgian and U.S. sites already do fill-finish for Wegovy but will eventually stop producing drugs for other pharma companies.

That, along with the addition of the Italian factory, will help the drugmaker boost Wegovy output quicker than expected, JP Morgan analysts said in a note.

Greater control over its supply chain should allow Novo to avoid the manufacturing quality problems Catalent created for the company throughout 2022, said Nicholas Anderson, portfolio manager at Thornburg Investment Management.

Catalent’s Brussels plant repeatedly breached U.S. sterile-safety rules in 2021 and 2022 and staff failed to perform required quality checks, Reuters reported last year citing regulatory documents.

The deal is expected to complete towards the end of 2024, with Novo anticipating it will help increase its filling capacity from 2026.