Could Novo-Catalent deal face antitrust hurdles?

Eli Lilly has called on financial regulators to look into the antitrust implications of Novo Holdings' purchase of Catalent and the sale of three manufacturing facilities to Novo Nordisk.

The pharma group’s chief executive, David Ricks, has told the Financial Times that the authorities should examine the deal closely, given that Catalent’s client roster includes “in excess of 100 entities, all of which plan to compete in some way with Novo Nordisk.”

Lilly and Novo Nordisk are squaring up for a big battle for dominance of the obesity market, and both companies have struggled to meet the massive demand for their weight-loss drugs, based on a class of drugs known as GLP-1 agonists.

In the three-way deal announced on Monday, Novo Nordisk’s majority shareholder Novo Holdings is buying Catalent for $16.5 billion, and then selling the three fill-and-finish facilities in the US, Belgium, and Italy to Novo Nordisk for $11 billion.

The issue was also alluded to by Lilly’s chief financial officer, Anat Ashkenazi, on the company’s fourth-quarter results call yesterday, who said: “We certainly have questions about that transaction and need to learn more.”

She added that Catalent “is an integral part or manufacturer of both commercial and pipeline products for the industry, especially in diabetes and obesity,” and noted that Lilly has products made at these sites as well. That does not, however, include Mounjaro and Zepbound, both based on dual GLP-1/GIP agonist tirzepatide and used to treat diabetes and obesity, respectively.

“Our focus today is on ensuring that continuity of supply of medicine for patients is uninterrupted, as well as we intend on holding Catalent accountable to their contract with us as we […] gain more information on this proposed transaction,” said Ashkenazi.

Novo Nordisk has acknowledged it will need antitrust approvals for the deal, which is intended to bolster manufacturing capacity for its diabetes and obesity therapies, currently headed, respectively, by semaglutide-based medicines Ozempic and Wegovy.

However, as the deal involves only three of 50 plans run by Catalent, and it has pledged to honour all existing contracts at the facilities, some market watchers believe there may be no obstacles to completing the transaction as planned later this year. Nonetheless, it is understood that, as contracts reach an end, the intention is to stop using the plants to produce medicines for other companies.

Rocks told the FT that the deal was “unusual” in the face of “growing concern about control of critical nodes in the medical technology supply chain.”

His comments came as Lilly reported sales of Mounjaro rocketed from $482 million in 2022 to $5.16 billion last year, its first full year on the market, while Zepbound made a strong start following its approval in November with sales of $176 million in the fourth quarter.

Both results came in ahead of analyst expectations and helped Lilly post a healthy 28% increase in total fourth-quarter revenues to $9.35 billion.