Novo Holdings, the asset manager of the foundation that controls Novo Nordisk, has agreed to acquire contract development and manufacturing organization (CDMO) Catalent for $16.5 billion—with the buyer standing to recoup two-thirds of that expense by selling three of Catalent’s fill-finish sites to Novo Nordisk for $11 billion upfront so it can meet booming demand for its blockbuster obesity drugs Wegovy® and diabetes drug Ozempic®, the companies said today.

The three sites—consisting of facilities in Bloomington, IN; Brussels, Belgium; and Anagni, Italy—employ more than 3,000 people combined, about one sixth of Catalent’s total global workforce of more than 18,000 people, including 3,000 scientists and technicians.

The three are part of Catalent’s network of more than 50 sites worldwide, and have what Novo Nordisk characterized as ongoing collaborations with the company. “After closing, Novo Nordisk will honor all customer obligations at the three Catalent sites that Novo Nordisk is acquiring,” Novo Nordisk said.

Catalent agreed to the sale following a review of its business, strategy and operations, and capital-allocation priorities by a committee of its board. The board agreed to the review after Catalent added four new independent directors supported by activist investor Elliott Investment Management, in order to avoid a proxy battle and reverse a stock price plunge that saw Catalent shares skidding 48% from $92.28 on August 30, 2022, to $47.81 on August 29, 2023, the day Catalent and Elliott came to terms. Part of that decline came after Catalent rattled investors and analysts in May 2023 by disclosing that it expected to significantly reduce its fiscal 2023 net revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance, each by more than $400 million.

Elliott and some affiliated entities have agreed to vote their shares of Catalent common stock in favor of the acquisition by Novo Holdings, which will take the CDMO private.

“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,” Marc Steinberg, Partner at Elliott Investment Management, said in a statement. “We commend Catalent’s board and management team for delivering this outstanding outcome.”

Catalent ranks number three on GEN’s most recent A-List of “Top 10 Contract Development and Manufacturing Organizations,” published last September. Like many other CDMOs, Catalent saw biopharmas cut back on development and manufacturing activity following a surge that followed the scramble a couple of years back to bring COVID-19 drugs and vaccines to market.

“Lots of Qs for existing clinical clients about implications, timelines, pricing, staffing, etc,” Nicole K. Paulk, PhD, CEO, founder, and president of Siren Biotechnology, posted today on X, formerly Twitter. “This is huge! I could care less about Wegovy, Catalent is the largest #AAV #GeneTherapy CDMO in the world and the only one with commercial experience.”

Addressing supply bottlenecks

Novo Nordisk agreed to acquire the three Catalent facilities with the aim of addressing supply bottlenecks for Wegovy and Ozempic—both of which contain the active ingredient semaglutide—that the metabolic drug giant has attributed to sharp sales growth for the drugs.

In releasing fourth quarter and full-year 2023 results last week, Novo Nordisk reported that sales of Wegovy more than quintupled in 2023, to DKK 31.343 billion ($4.515 billion) from DKK 6.188 billion ($891.316 million) in 2022. Sales of Ozempic nearly doubled, rocketing 60% to DKK 95.718 billion ($13.787 billion) from DKK 59.75 billion ($8.606 billion).

Overall, Novo Nordisk finished 2023 with a 51% jump in net profit, to DKK 83.683 billion ($12.042 billion) from DKK 55.525 billion ($7.99 billion) a year earlier. The company reported net sales of DKK 232.261 billion ($33.421 billion), up 31% from DKK 176.954 billion ($25.462 billion) in 2022.

“We are very pleased with the agreement to acquire the three Catalent manufacturing sites which will enable us to serve significantly more people living with diabetes and obesity in the future,” stated Lars Fruergaard Jørgensen, Novo Nordisk’s president and CEO. “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.”

Catalent said it expected to release second fiscal quarter 2024 earnings results on Friday. The company will not host an earnings conference call due to the Novo Holdings acquisition.

Novo Holdings said its deal to acquire Catalent was consistent with its strategy of investing in established life science companies with strong long-term potential.

“With our expertise and track record of investing in high quality life sciences businesses, we believe Catalent is a very good strategic fit,” stated Kasim Kutay, CEO of Novo Holdings. “As engaged investors committed to productive relationships with all our partners, we look forward to working with the Catalent team to realize the Company’s full potential.

Stock buying surge

Investors signaled support of the deals with a buying surge that sent Catalent shares up 10% today on the New York Stock Exchange, from $54.51 to $59.82. Shares of Novo Nordisk traded on Nasdaq Copenhagen rose about 4% to DKK 809.80 ($116.67).

On Thursday, Cantor Fitzgerald analyst Louise Chen raised its 12-month price target on Novo Nordisk shares 17%, from $120 to $140, and maintained her firm’s “Overweight” rating on the stock.

Novo Holdings agreed to acquire all outstanding shares of Catalent for $63.50 per share cash, a premium of 16.5% to the closing price of Catalent’s common stock on Friday, and a 47.5% premium to the 60-day volume-weighted average price as of Friday. The purchase price also represents a premium of 39.1% to the closing price of Catalent’s common stock on August 28, the last trading day before Catalent announced that its board formed a Strategic and Operational Review Committee to conduct a review of Catalent’s business, strategy and operations, as well as Catalent’s capital-allocation priorities with a view towards maximizing value for all Catalent stockholders.

Novo Nordisk said that its acquisition of the Catalent sites is expected to have a low single-digit negative impact on operating profit growth both this year and next. The acquisition will be mainly debt-financed, so Novo Nordisk’s previously-announced plan to buy back DKK 20 billion ($2.877 billion) in shares will not be affected, the company added.

Catalent’s board has unanimously approved the acquisition, expected to close towards the end of calendar year 2024, subject to customary closing conditions, including approval by Catalent stockholders and receipt of required regulatory approvals.

After the deal is completed, Catalent will continue to operate independently and separately from Novo Holdings and Novo Nordisk, the companies said.

“This transaction is a testament to our team’s hard work and dedication to this mission, and I am incredibly excited for this next step in our journey,” stated Alessandro Maselli, Catalent’s president and CEO. “We look forward to benefiting from Novo Holdings’ significant resources to accelerate investment in our business and enhance key offerings as we continue to offer premium development and manufacturing solutions for pharma and biotech customers.”

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