- Novo Holdings – the investment arm of Novo Nordisk’s parent foundation – is acquiring Catalent for $16.5 billion, in what is being seen as a bold move for dominance in the fast-growing GLP-1 drug market.
- The deal includes the sale of three Catalent fill-finish sites in Italy, Belgium, and Bloomington, IN to Novo Nordisk for $11 billion. These sites, employing 3,000 people, will enhance Novo Nordisk’s existing supply network.
- The industry reacts as Eli Lilly calls for competition regulators to scrutinise the deal, the European Medicines Agency said it will investigate any risk of drug shortages and AstraZeneca aim to move more production in-house.
What happened?
Catalent, involved in producing Novo Nordisk’s top-selling GLP-1 obesity drug Wegovy, has over 50 sites globally. The acquisition follows Catalent’s strategic review due to declining revenue and issues at major manufacturing sites.
The purchase price of $63.5 per share is a 39.1% premium to Catalent’s stock price before the review. Catalent’s share price has risen as a result.
Post-acquisition, Catalent will go private and cease trading on NYSE. The deal allows Novo Holdings to make larger investments, fuelled by soaring sales of Wegovy and other GLP-1 drugs.
“The acquisition complements the significant investments we are already doing in active pharmaceutical ingredients facilities, and the sites will provide strategic flexibility to our existing supply network,”
Lars Fruergaard Jørgensen, Novo Nordisk’s president and CEO
The GLP-1 landscape is currently a ‘two horse race’ between Eli Lilly and Novo Nordisk. With over one third of diabetics in the U.S. are expected to use GLP-1 by 2030, it is a highly valuable market.
What’s next? The industry reacts
The acquisition is raising questions about what happens to existing contracts from pharma companies, many of whom will be competing with Novo Nordisk.
Eli Lilly CEO David Ricks has expressed concerns about the deal and its potential impact on the pharmaceutical manufacturing industry.
“Given the nature of this transaction — a vertical integration where the client list of Catalent might number in excess of 100 entities, all of which plan to compete in some way with Novo Nordisk — it sets up for an interesting inquiry by everybody [including] politicians,” he said in an interview with the Financial Times.
AstraZeneca CEO Pascal Soriot says the acquisition means they need to spend more to build in-house manufacturing capacity to produce its portfolio of medicines. “It really means for us that we need to be as independent as we can, in terms of our own supply”, said Soriot, adding “There is a lot more to do”.
But how unusual is this really in an industry where M&A is a constant? We spoke to Elliott Berger, strategic advisor at Orientation Marketing and previously Chief Marketing Officer with Catalent.
The importance of GLP-1 to the pharma industry
J.P. Morgan Research forecasts that the GLP-1 category will exceed $100 bn by 2030. This will be driven by diabetes and obesity usage as the U.S. obesity market is forecast to reach $44 bn in 2030 — up from just $0.5 bn in 2020 (see below).
“This acquisition really shows how powerful GLP-1 obesity drugs are as a force that’s reshaping not only the pharma but also the CDMO industry.” says Elliott.
“Novo is clearly taking a very proactive option to accelerate it’s capacity to produce their entries in this space, that have a long way to go before patent expiration. There is also the next generation of these drugs in development and production assets for the other parts of their large drug portfolio. Novo can utilise its ample access to capital to leverage the scale and expertise at Catalent sites to expand manufacturing, avoid shortages and continue to grow.” says Elliott.
“A spell in private hands away from the glare of the public markets, could be highly beneficial to recover from the COVID-19 highs, focus on operational excellence and fill up significant existing state-of-the-art capacity they have across the network. Novo Holdings is a private investor and has several other relevant CDMO and CRO portfolio companies to potentially interplay with their new investments.”
Elliott believes that given the roller coaster Catalent has been on since COVID-19, the acquisition will be positive way to secure the future of the manufacturers other nearly 50 sites across small molecules, cell and gene therapies.
Antitrust issues?
Eli Lilly has called for competition regulators to scrutinise the deal.
The European Medicines Agency said on Wednesday it will investigate any risks to the availability of medicines processed at Catalent that will be sold to Novo Nordisk as part of its mandate to prevent drug shortages.
Elliott doesn’t believe there is much risk of antitrust laws blocking the acquisition. “I am no expert, but I don’t see much in a way of restraint of trade.” he says.
“There are plenty of other large fill/finish providers with capacity to contract with or buy. It’s not at all unusual for large pharma to provide CDMO services out of their own product sites – for example Pfizer CentreOne. Novo should be able to do the same by meeting their internal needs, while also fulfilling external contract demand.”
Ultimately patients will benefit in the form of reduced shortages, says Elliott. “Having said that, these things are political and the logic might not apply, so you never know!” he adds.
Overview of outsourcing trends 
