Novo Nordisk can’t make enough of its metabolic disorder drugs to satisfy the market’s insatiable appetite for them. Two multi-billion dollar business deals provide the drugmaker with additional capacity to address that growing demand in the years to come.
Novo Holdings, the investment arm of the foundation that holds a controlling stake in Novo Nordisk, is acquiring Catalent in a transaction that values the contract manufacturer at $16.5 billion. According to deal terms announced Monday, Novo Holdings will pay $63.50 cash for each share of Catalent. That price is a 16.5% premium to Catalent’s closing stock price on Friday and a 47.5% premium to its average stock price in the past two months.
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The acquisition of Somerset, New Jersey-based Catalent is expected to close by the end of this year. Soon after it does, Novo Nordisk will pay $11 billion up front to acquire from Novo Holdings three Catalent manufacturing sites specialized in the filling of vials for sterile injectable drugs, according to a deal also announced on Monday. These three sites—in Italy, Belgium, and Indiana—already have ongoing relationships with Novo Nordisk as part of the company’s global manufacturing infrastructure for making its GLP-1 agonist drugs, such as the type 2 diabetes medication Ozempic and Wegovy for chronic weight management. Novo Nordisk’s efforts to meet growing demand for these drugs has also led it to invest in upgrades of its own facilities. This past November, the company announced about $8.4 billion in investments planned for existing production sites in Denmark and France.
Catalent is one of the largest contract development manufacturing organizations (CDMOs) in the life sciences industry. The company reported $4.2 billion in net revenue for the fiscal year ended June 30, 2023. But that sum was down 9% from the prior fiscal year. The company’s stock price has also fallen from its Covid-19 peak. Similar to other CDMOs, Catalent attributed declining revenue to the drop off in Covid-19 work.
However, Catalent also faces legal problems related to Covid-19 revenue recognition at its sites. In its financial reports, the company has disclosed shareholder lawsuits regarding its facilities. Included in the claims are allegations that Catalent “cut corners” on safety and control procedures at key facilities along with the premature recognition of revenue in violation of generally accepted accounting principles. Catalent has said it believes it has defenses against the claims and it intends to defend against the allegations.
The Novo Holdings acquisition agreement comes about five months after Catalent engaged Elliott Investment Management to review the company’s business strategy as well as its capital allocation. One bright spot for the company is GLP-1 drugs. The global market for GLP-1 products totaled about $6 billion in 2023, Catalent said in its presentation during the J.P. Morgan Health Care Conference in San Francisco last month. That market is projected to reach $100 billion in 2030. Catalent said it has $500 million in current and planned investment going toward its GLP-1 manufacturing capacity.
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Novo Nordisk said that after it acquires the three Catalent manufacturing sites, it will honor all prior customer obligations of those facilities. The Catalent acquisition still needs approval of that company’s shareholders. Its board of directors unanimously recommended a vote in favor of the deal; Elliott and its affiliates have also agreed to vote their shares in favor of the acquisition.
“As a significant investor in Catalent, Elliott fully supports the transaction announced today,” Marc Steinberg, partner at Elliott Investment Management, said in a prepared statement. “We believe that this transaction, which is the culmination of a process led by the Strategic and Operational Review Committee of the Catalent board, clearly maximizes value for Catalent stockholders.”
The merger agreement has an end date of Feb. 5, 2025, though it can be extended, Catalent said in a regulatory filing. If the deal does not secure the needed regulatory and shareholder approvals by the end of the agreement, Novo Holdings is required to pay Catalent a $584.4 million termination fee. Catalent has agreed it will not seek alternative bids. But if an unsolicited superior offer emerges and Catalent agrees to it, the company must pay Novo Holdings a $344.8 million termination fee.
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