Eli Lilly calls for scrutiny of rival Novo Nordisk’s deal to expand production of weight-loss drug

Eli Lilly has called for competition regulators to scrutinise an $11bn deal by its main competitor Novo Nordisk to snap up additional manufacturing capacity, as the rivalry between the drugmakers to dominate the anti-obesity drugs market heats up.

David Ricks, the chief executive of the Indiana-based drugmaker, said Novo Nordisk’s acquisition of three manufacturing plants was “unusual” given “a growing concern about control of critical nodes in the medical technology supply chain” from antitrust authorities.

Lilly relies on some of the sites to produce some of its own diabetes and obesity treatments, which compete with Novo Nordisk’s Ozempic and Wegovy, a class of drugs known as GLP-1s. Lilly’s newest GLP-1 products, Mounjaro and Zepbound, do not however use the sites purchased as part of the deal.

As part of a three-way deal announced on Monday, Novo Holdings, the Danish drugmaker’s controlling shareholder, agreed to pay $16.5bn for one of the world’s largest contract medicines manufacturing companies, Catalent. Novo Holdings said it would then sell three of Catalent’s sites to Novo Nordisk.

Speaking to the Financial Times, Ricks suggested the transaction should be looked at by antitrust authorities. “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,” Ricks said.

Novo Nordisk said that the deal and its consequent acquisition of the sites would be subject to regulatory and shareholder approval. “Once it is complete, which we anticipate around the end of 2024, Novo Nordisk will honour all existing contracts,” the company told the FT on Tuesday. Novo Holdings declined to comment.

Novo Holdings will be required to pay Catalent a $584.4mn termination fee if the deal fails to obtain the necessary regulatory approvals, according to a filing.

Surging demand for a new class of diabetes and weight-loss drugs has caused a huge jump in revenues at Novo Nordisk and Lilly, creating a market that could be worth about $100bn by the end of the decade, according to analyst projections. But both drugmakers have said at recent fourth-quarter earnings updates that supply constraints will drag on sales for the foreseeable future.

Novo Nordisk is acquiring plants that specialise in “fill-finish” operations, the final stage of manufacturing drugs, in Indiana, Brussels and Anagni, Italy.

The company expects the acquisitions to increase its capacity to make drugs, including Ozempic and Wegovy, from 2026 onwards. This could limit the capacity of the sites to make drugs by other manufacturers.

Ricks said Lilly contracted at least one of the three sites purchased by Novo Nordisk to fill its own weight-loss injection pens. “It’s not a meaningful part of our output but it’s not an insignificant number,” said Ricks.

Lilly also used some of Catalent’s 47 other sites, which will now be owned by Novo Nordisk’s controlling shareholder, in the production of other treatments, including gene therapies, he added.

“We need to understand the impact of this transaction on medicines and in particular some of those sites are used for diabetes and obesity, so it does raise questions,” said Ricks. Lilly has invested billions of dollars to grow production capacity for its weight-loss treatments across sites in Germany, North Carolina and its home state of Indiana but Ricks said the company was a “long way” from having sufficient supply to meet demand.

Ricks said Lilly “will make it abundantly clear to Catalent that we plan to enforce our contract with them to the letter”.

Lilly, the world’s biggest drugmaker by valuation, on Tuesday said it was now expecting annual revenue of between $40.4bn and $41.6bn this year, up from $34.1bn in 2023 and ahead of analysts’ consensus of $39.3bn, driven by booming sales from its weight-loss and obesity drugs.

The drugmaker said fourth-quarter revenues from its new products category grew by $2.19bn to $2.49bn, largely because of sales of diabetes drug Mounjaro and anti-obesity medication Zepbound. Zepbound generated $175.8mn in worldwide sales in the fourth quarter, after only being approved for use by the US Food and Drug Administration in November.

Lilly’s shares were up 1 per cent in New York on Wednesday.