Novo Nordisk’s parent to buy Catalent for $11.5 billion to boost Wegovy supply

By Maggie Fick and Leroy Leo

(Reuters) -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 (NYSE:), a key manufacturing subcontractor of the product, for $11.5 billion.

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

Novo Holdings, which is the investment arm of Novo’s controlling shareholder, the Novo Nordisk Foundation, will buy Catalent’s shares for $11.5 billion, with the deal worth $16.5 billion when including debt.

After the merger closes, Novo Holdings will then sell three of Catalent’s fill-finish sites — in Italy, Belgium and the United States — onto Novo Nordisk for $11 billion.

“We have sold some very important fill-finish capacity to Novo Nordisk as part of this transaction,” Kutay said in an interview. That capacity is a “a key strategic consideration for Novo Nordisk particularly when thinking about patients and making sure there is broader rollout for Ozempic and Wegovy”, he said.

Novo Nordisk’s shares were up nearly 4% in afternoon trading in Copenhagen, while Catalent’s shares rose as much as 10% to a more than nine-month high in early trading in New York.

The move comes as Novo faces competition from U.S. rival Eli Lilly (NYSE:)’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 of the drugs. 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 is already the main supplier of fill-finish work for Novo, but Monday’s deal will enable it to add Catalent’s factory in Anagni, Italy as another fill-finish site and for the other two sites to exclusively produce drugs for Novo as opposed to for multiple pharma companies.

This conversion of Catalent sites over time to exclusive use by Novo will help the drugmaker boost output of Wegovy quicker than was expected before the announcement of the deal, JP Morgan analysts said in a note.

Novo said it expects the deal to help increase its filling capacity starting in 2026.

Monday’s announcement caps a tumultuous period for Catalent.

It follows a strategic review as part of a settlement with activist investor Elliott Investment Management in August after Catalent struggled with manufacturing problems including the Brussels plant where Wegovy pens are filled.

Catalent is the main supplier of fill-finish work, or filling and packaging syringes and injection pens, for Novo Nordisk’s Wegovy.

The three Catalent sites that Novo Nordisk will acquire from its controlling shareholder Novo Holdings are in Anagni, Italy; Brussels, Belgium; and Bloomington, Indiana. Novo Holdings owns 76.9% of the voting shares in the Wegovy maker.

The deal for the three fill-finish sites will have a low single-digit percentage negative impact on operating profit growth in both 2024 and 2025, Novo Nordisk said.

Novo Holdings said it will buy all outstanding shares of Catalent for $63.50 per share in cash, a premium of 16.5% to the company’s last trading price.

OPPORTUNITY

Novo Holdings began pursuing a deal with Catalent, which for months had been the target of takeover interest from both private equity firms and strategic buyers, in August last year when Catalent announced a strategic review of its business.

“When we saw that, we said: There may be an opportunity to do something here. That was the trigger,” said Kutay.

Contract drug manufacturers seeking to tap into the booming market for weight-loss drugs are investing billions of dollars to expand or build factories.

“This is very, very core to us, not just because it’s a life science company, but because it’s in a sector that we like and that we have prioritised and where we have other assets,” Kutay said.

Novo Holdings already owns a contract research organization called Altasciences and a CDMO called RiteDose, both in the United States.