By Josh Nathan-Kazis

Henrik Wulff, the man in charge of product supply at Novo Nordisk, just spent $11 billion to try to fill an ocean.

Novo has handed Wolff one of the most complex jobs in all of pharmaceuticals. He is responsible for overseeing the globe-spanning effort to meet the tremendous demand for semaglutide, the GLP-1 drug Novo sells to treat obesity under the brand name Wegovy, and as a Type 2 diabetes treatment under the name Ozempic.

Investors are expecting massive sales, but uptake so far has been stymied by persistent supply troubles. Novo and its competitor Eli Lilly have gone to greater and greater lengths to speed their GLP-1 output, as they battle each other and the increasingly aggressive telehealth industry, which is selling large quantities of legal GLP-1 knockoffs.

Wulff, 54, is executive vice president for product supply, quality, and information technology at Novo. That gives him responsibility for the three manufacturing sites the company bought earlier this week for $11 billion in its most extreme effort yet to ramp up GLP-1 supply.

"When you hit a blue ocean, or a demand that is basically endless, and you try to cope with that, then what happens is when you have removed one bottleneck, there will be another bottleneck showing up," Wulff told Barron's on Thursday.

The new manufacturing sites will help Novo clear what might be one of the most significant of those bottlenecks: capacity to perform the difficult, highly-specialized last phase of production of a medicine like Wegovy, in which the medicine is actually placed in the vial or device in which it's shipped to pharmacies.

Wulff says that Novo will use the new factories both to make the pens used to inject semaglutide, and to fill those pens. Including the new sites, Novo will now have 14 similar facilities around the world.

The deal "will definitely ease our filling capacity, and what we call the pen capacity," Wulff said. "We will use these three sites to further expand both our aseptic filling capacity and for producing the devices."

It won't come a moment too soon. Investors' faith in the obesity trade has been wavering in recent months. What had once seemed a straightforward bet that high obesity rates would translate to megablockbuster sales for a highly-effective obesity drug has now grown more complex, as the challenges inherent in the rollout come into focus.

Novo's American depositary receipt, while still up nearly 200% over the past four years, is down nearly 30% in the second half of 2024.

The new deal, which closed on Wednesday, was as complex as it was controversial. Novo's controlling shareholder, Novo Holdings, bought Catalent, one of the world's largest contract manufacturers, for $16.5 billion. Novo then bought three Catalent manufacturing sites from Novo Holdings for $11 billion. The rest of Catalent, excluding those three sites, will operate as a private firm under the ownership of Novo Holdings.

Competitors, advocates, and some politicians had asked regulators to block the deal, arguing it could reduce competition among contract manufacturers, among other concerns. Regulators weren't worried, and waved the deal through.

Still, the new arrangement creates some very strange dynamics: contract manufacturers schedule time at their plants many years in advance, and the three sites Novo bought are booked solid for years to come. Novo has said it will honor existing contracts at the three facilities, which means it will be manufacturing its competitors' drugs.

"They are many, and they are from small biotech to big pharma," Wulff said of the existing contracts. He said the contracts run between two years and eight years, but that eventually the three facilities would be used only by Novo.

Lilly has contracts at the facilities, though not for work on drugs that compete with Novo medicines. "I will respect their contract, and I will do whatever I can to fulfill their contracts," Wulff says. "I will treat them as good as I can."

In a statement on Monday, Lilly told Barron's that it expected Catalent to "perform on its obligations to Lilly," but noted that it has been investing in its own self-run facilities.

Wulff said that Novo's plans for the new plants won't be impacted by the longer term contracts. Two of the new facilities, he said, one in Bloomington, Indiana, and one in Anagni, Italy, are extremely large. "It's not an obstruction for us that there are some other products that we are good at producing at one end of the facility," he said. The third new facility is in Brussels.

Novo will eventually be able to expand semaglutide production onto existing lines in the three factories, and to expand the facilities to increase their output.

"They are part of a bigger puzzle across the globe producing semaglutide, " Wulff said of the new facilities.

Today, semaglutide remains in shortage in the U.S. The Food and Drug Administration said Thursday that Lilly's tirzepatide was officially out of shortage. Novo executives said on an investor call in November that the company expects supply constraints to continue.

"If we redirect everything that we have of GLP-1 to the U.S. we will be immediately out of the drug shortage situation," Wulff said.

But Novo is a global company, trying to meet demand in existing markets and to launch the drug in new markets around the world. "We try to balance these launches up against the in-market demands, and try to guesstimate how we can get out of the drug shortages," he said.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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December 19, 2024 16:21 ET (21:21 GMT)

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