Novo Acquires Catalent, Shakes Up Outsourcing World

By Louis Garguilo, Chief Editor, Outsourced Pharma

Few if any CDMOs have brought Outsourced Pharma readers more news than Catalent, including its IPO in 2014. And readers have perhaps worked with Catalent on as many projects as any other CDMO.

But now both the news and your outsourcing stream will be diminished by this press-release bomb:

Novo Nordisk is acquiring three fill-finish sites from Novo Holdings A/S in connection with the purchase of Catalent, Inc. by Novo Holding.

Readers will want to know immediately what sites those are, although many of you will already have some ideas, because all three have ongoing work for Catalent.

The three manufacturing sites are specialised in sterile filling, and located in Anagni (Italy), Brussels (Belgium) and Bloomington (Indiana, U.S.).

Together, they employ more than 3,000 people.

It appears that’s 3,000 skilled manufacturing and fill-finish specialists who will never work with you again.

This comes as readers have already pointed out the ability to contract with fill-finish CDMOs is one of the biggest challenges you face. In fact, my latest editorial published today is titled: Creative Outsourcing Strategies, But Fill-Finish Still A Concern)

Of course this Novo Nordisk/Catalent news can be summed up in a word, amplified by the title of the Wall Street Journal item covering this story: 

Wegovy Maker to Boost Production Capacity With Multibillion-Dollar Deal”

Novo Nordisk describes the acquisition of the three sites as part of its strategy of reaching more people living with diabetes and obesity with current and future treatments.

“It enables an expansion of the manufacturing capacity at scale and speed while providing future optionality and flexibility for Novo Nordisk’s existing supply network. The acquisition is expected to gradually increase Novo Nordisk's filling capacity from 2026 and onwards.”

For the multitudes saying the diabetes/weight-loss drugs (include Lilly’s, et al.) are ”taking over markets" and capacity, they appear to be right.

I’m not sure, though, anyone expected that would include completely taking out one of your most important outsourcing options in perpetuity.

Some Detail

First, the money.

The deal values Catalent in total as worth $16.5 Billion (including some debt).

The merger is expected to close toward the end of 2024. At completion, Catalent shares will no longer trade on the NYSE (I guess we can say it ended up a good decade), and will become a private company.

Novo-Catalent is claiming they will not impact your projects already underway.

A statement says: “Until the closing of the acquisition, Catalent will continue to operate independently and separately from Novo Holdings and Novo Nordisk,” and “[a]fter closing, Novo Nordisk will honour all customer obligations at the three Catalent sites that Novo Nordisk is acquiring.”

Under the terms of the purchase agreement, Novo Nordisk will then acquire the three manufacturing sites, for an upfront payment of  $11 Billion.

Next the reason for Novo to lay out those dollars.

That overriding answer is easy: Sales and increasing demand for Wegovy/Ozempic (semaglutide) – as drugs for obesity and weight loss – caught Novo Nordisk in a supply shortage, causing the Big Pharma to restrict supply of Wegovy, and recently announce plans to invest more than $6 billion internally to increase capacity.

Evidently, that is still woefully insufficient against projected supply needs.

For those who wonder (like me), here are a few details on the purchaser of one of our industry’s stalworths, but I promise to keep it short:

Novo Holdings A/S (known as Novo Holdings) will acquire Catalent, until now a global CDMO headquartered in Somerset, New Jersey.

Novo Holdings is a holding and investment company “responsible for managing the assets and the wealth of the Novo Nordisk Foundation,” and generating long-term returns on the assets of the foundation.

The Novo Nordisk Foundation is an independent organization “with corporate interests that supports scientific, humanitarian and social causes.” From its website:

“In accordance with the Foundation’s Articles of Association, the Foundation is obligated to maintain a controlling interest in Novo Nordisk A/S and Novonesis A/S, the Novo Group’s two large publicly listed companies.”

Novo Nordisk and Novo Holdings are, as we might have easily imagined, “closely related parties.” Novo Nordisk’s Board of Directors has approved the acquisition of Catalent, “finding it to be in the best interest of Novo Nordisk and its shareholders.”

Catalent, by the way, says the same about its shareholders.

I don’t believe anyone can say the same for current Catalent customers.

Or for Outsourced Pharma readers, who see shrinking outsourcing options as CDMO M&A continues, and in such dramatic fashion.

Early Analysis

As mentioned above, the three sites are specialized in sterile filling, and Lars Fruergaard Jørgensen, president and chief executive officer at Novo Nordisk, is a happy executive.

“We are very pleased with the agreement to acquire the three Catalent manufacturing sites,” he says in a press release, “which will enable us to serve significantly more people living with diabetes and obesity in the future.”

“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.”

And indeed, from his perspective and that of (what seems to be) countless end-user populations, this is a positive overall pharma-industry development. All the current medicines and those being developed will serve us well.

Congratulations are due both to Novo Nordisk, and to Catalent, the latter having proved what a powerful force it had become in the outsourcing industry.

Even with that, though, we do have to face a major player – particularly in the fill-finish arena – being wiped off the outsourcing options list of every biopharma established and from here-on those emerging.

Some questions for us to consider.

• Will other CDMOs increase capacity, facilities and skillsets to replace this capacity?
• Will new CDMOs emerge as they see an opening for providing services for a starving customer population?

Perhaps more interesting in a strategic sense:

• Will some CDMOs now position themselves long-term for Big Pharma acquisition? Perhaps somewhat similar to the way emerging biotech has to think about its exit strategy via their bigger and more powerful industry mates.
• And how many Catalent employees may leave their current employment and be taken in by other CDMOs?

Our industry is changing. In this case, it's because of the wild success of some drugs helping patients that had little to no help in the past.

To be clear (because it appears Novo Holdings has not been), we don't know what happens to the many sites/facilities minus the three fill-finish operations now internal to Novo Nordisk. Will those facilities continue to serve as a CDMO, eventually end up as parts of Novo Nordisk, too, or perhaps be split up and sold off?  

 I’ve got a feeling this is the start of a string of newsworthy events in our future, potentially emanating from various sources. Stay tuned, as we say ...