Novo Nordisk A/S has entered into an agreement that enables the Danish pharmaceutical company to cope with the increasing demand for its weight-loss drug Wegovy and diabetes treatment Ozempic. The firm’s largest shareholder is purchasing Catalent Inc., a leading global drug-manufacturing enterprise, for $16.5 billion, including debt. As part of this three-pronged deal, Novo will pay the shareholder $11 billion to acquire three factories owned by Catalent.
The rush to establish a more reliable supply-chain comes after Novo experienced lack of sufficient supply of both Wegovy and Ozempic doses. Novo is presently in stiff competition with Eli Lilly & Co., whose newly approved weight-loss medication Zepbound is anticipated to become history’s highest-selling drug. During patient trials, Lilly’s medication resulted in higher weight loss than any drug Novo has released to date.
Elliott Investment Management, an activist investor, supports the sale of Catalent, in which it holds a stake. The deal is valued at $63.50 per share in cash, reflecting a 17% premium to Catalent’s closing price on the preceding Friday. Although Catalent’s shares were trading at approximately $140 each in September 2021, several manufacturing issues with a few of the drugs it produced led to a decrease in value; these included Moderna Inc.’s Covid-19 vaccine and one of Regeneron Inc.’s best-selling drugs.
Novo’s shares, which have been rising due to the increasing demand for its obesity and diabetes drugs, rose by 3.6% in Copenhagen, setting a new record. Novo is now Europe’s largest publicly traded company with a market value exceeding $520 billion. Catalent’s shares also surged by up to 10% in New York.
Life sciences company Danaher Corp showed interest in acquiring Catalent in the previous year. Catalent, stationed in Somerset, New Jersey has become widely-known as a vaccine and treatment producer during the pandemic. However, there have been regulatory issues with its factory in Bloomington, Indiana in the past, including for the production of Wegovy.
Novo Nordisk’s acquisition of three factories located in Italy, Belgium, and Indiana won’t instantly resolve the company’s manufacturing issues. It intends to incrementally increase production capacity from 2026 onwards. In spite of the challenges, Novo continues to profit from the new class of obesity treatments it has helped innovate.
To accelerate the supply of key products, in particular Wegovy, Novo Nordisk has sound business motives to buy these manufacturing plants, according to Brian Borsting, a credit analyst with Danske Bank A/S. The acquisition of Catalent’s factories is one amongst many actions taken by Novo to fix its supply issues. In the past year, the company declared $8.7 billion of new investments to strengthen manufacturing and revealed plans to invest in production facilities in Denmark and France. It also recently announced that it had more than doubled the number of Wegovy starter doses being shipped to the US, enabling more patients to commence treatment.
