Late last month, Novo Holdings’ CEO Kasim Kutay hinted that the fund manager was eyeing buyouts as an outlet for its trove of Wegovy cash. Now, a major deal has materialized.
Novo Holdings, which operates under Novo Nordisk’s owner the Novo Nordisk Foundation, is laying out $16.5 billion to snap up contract manufacturing giant Catalent, the companies revealed Monday. Specifically, Novo Holdings is acquiring all outstanding shares of the CDMO for $63.50 per share in cash, representing a 16.5% premium to the closing price of Catalent’s stock on Friday.
The merger is expected to close toward the end of 2024, the companies explained. Aside from Catalent’s board of directors favoring the move, the buyout has earned the blessing of Elliott Management, the activist investor that struck up a cooperation agreement with Catalent last summer.
The Elliott accord arrived during a rough patch for Catalent, which struggled throughout 2023 with manufacturing hiccups, executive turnover and sliding revenues. Under Elliott’s guidance, Catalent in August added four new independent directors to its board to oversee a strategic and operational review committee. That committee was tasked with reining in Catalent’s business, strategy and operations, plus its capital-allocation priorities.
Catalent's share price peaked at around $140 in September 2021 thanks to a surge in pandemic-related business, but financial and manufacturing troubles caused a sharp decline in recent years. Shares hit as low as $34 in November 2023 before a multi-month rebound.
Rumors about Catalent as a potential buyout target have been circulating for about a year. Last February, word surfaced that life sciences conglomerate Danaher was seeking to poach the CDMO at a “significant premium,” according to a Bloomberg report.
Just a few months later, however, Danaher appeared to shelve that plan. It wasn’t immediately clear why Danaher changed its mind, but news of the rescinded offer came right after Catalent revealed productivity problems and high costs at three of its facilities—including two of the CDMO’s largest.
The latest deal is poised to benefit Novo Nordisk, which has been on a multi-year roll ever since the launch of its obesity wunderkind Wegovy back in 2021.
As part of the Catalent transaction, Novo Nordisk is slated to acquire three of the CDMO’s fill-finish sites from Novo Holdings, Novo Nordisk said in a separate statement Monday. Novo Nordisk says the purchase will contribute to its manufacturing network for current and future treatments for diabetes and obesity. Novo Nordisk is playing $11 billion up front for the facilities.
The move will help expand Novo’s current manufacturing capacity at “scale and speed” and provide flexibility for the drugmaker’s existing supply network. The acquisition is expected to gradually boost Novo Nordisk’s filling capacity from 2026 onwards.
The sites specialize in sterile drug filling and span the globe, from Anagni, Italy, and Brussels, Belgium to Bloomington, Indiana. The three sites employ more than 3,000 people and already have ongoing collaborations with Novo Nordisk.
Novo Holdings' acquisition is noteworthy given Catalent’s name recognition alone, though the deal shouldn’t come as a total surprise. Just last month, in fact, Novo Holdings’ chief executive Kutay said he expected to do “a fair amount” more deals in 2024 during an interview with Bloomberg TV in Davos.
Novo Nordisk, for its part, has already pumped billions of dollars into its manufacturing network for the nigh-unstoppable GLP-1 juggernauts Ozempic and Wegovy. The drugs have each proven to be smash hits, but with that popularity, persistent supply problems have surfaced as well.
To counter the supply squeeze, Novo Nordisk in early November said it was splashing out roughly $6 billion to expand its existing manufacturing facilities in Kalundborg, Denmark, where most of the outlay would go toward increasing capacity for active pharmaceutical ingredients, including the semaglutide used in Ozempic and Wegovy.
Just a few weeks after that, Novo signaled a separate, $2.3 billion expansion at its long-held production site in Chartres, France—again to assist with supply of the company’s GLP-1 products.
While the deal is certainly good news for Novo's production network, it remains to be seen how Catalent's acquisition will affect the rest of the contract manufacturing realm.
Catalent is among the top 3 CDMOs by revenues, according to a compilation of 2022 revenues from Genentic Engineering & Biotechnology News. The company generated around $4.28 billion during its fiscal year 2023 and boasts dozens of sites across Asia, Europe, Latin America and North America.