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Novo Holdings to buy contract drugmaker Catalent for $16.5B

Novo Holdings, the controlling shareholder of Danish drugmaker Novo Nordisk, will buy contract manufacturer Catalent for $16.5 billion in a take-private deal the companies announced Monday.

In a related transaction, Novo Nordisk has agreed pay its parent company $11 billion to take over three Catalent plants in Italy, Belgium and Indiana to help expand production of its GLP-1 drugs Ozempic and Wegovy. Demand for the latter, which is approved in the U.S. for treating obesity, has greatly exceeded supply, forcing Novo Nordisk to restrict access.

Novo Nordisk and Catalent already work together at the three sites, which employ more than 3,000 staff.

Announcement of the deal comes five months after Catalent, pressed by activist investor Elliott Investment Management, began a business review following production setbacks. Marc Steinberg, an Elliott partner, said in a statement the fund “fully supports” the transaction.

Novo Holdings will pay $63.50 a share, a 16.5% premium to Catalent’s closing price Friday and nearly 50% above the average price over the past two months, weighted by trading volume. Upon the deal’s close, which is expected by the end of 2024, Novo Holdings will take possession of Catalent’s more than 50 sites, which include production facilities for small-molecule pills, injectable biologics, as well as cell and gene therapies.

“Our acquisition of Catalent is aligned with our mandate to invest in high quality life sciences companies,” said Novo Holdings CEO Kasim Kutay in a statement.

The three sites being purchased by Novo Nordisk specialize in what’s known as fill-finish, or the processes of sterilizing and standardizing pharmaceutical products and containers before filling and sealing the containers with drug product.

“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,” said Novo Nordisk CEO Lars Fruergaard Jørgensen in a statement.

Due to its manufacturing problems, Novo Nordisk had restricted supply of the Wegovy starter doses so people already on treatment could continue receiving the drug. Last week, the Denmark-based drugmaker announced it would lift the restriction as it has been able to expand supply.

Maintaining a sure supply will become even more essential for Novo Nordisk as it faces competition from rival Eli Lilly, which recently launched a weight-loss drug called Zepbound.

Moreover, Wegovy demand may rise further following clinical trial data that showed the drug could reduce the risk of heart complications and death in people who are overweight and have cardiovascular disease. Should the Food and Drug Administration approve Wegovy for cardiovascular use, insurers might widen coverage.

Novo Nordisk said it will finance the purchase of the three manufacturing sites by borrowing money, which will have a “low single-digit negative impact” on operating profit growth in 2024 and 2025. The company last week said it expects operating profit growth of between 21% and 29% in 2024, assuming constant exchange rates.

Novo Holdings owns just over one-quarter of Novo Nordisk shares, but controls about 77% of voting capital. It itself is wholly owned by the Novo Nordisk Foundation, and had assets of 108 billion euros at the end of 2022.