A view of the logo of Novo Nordisk at the company's office in Bagsvaerd, on the outskirts of Copenhagen, Denmark, March 8, 2024.
A version of this article first appeared in CNBC's Healthy Returns newsletter, which brings the latest health-care news straight to your inbox. Subscribe here to receive future editions.
Novo Nordisk just got a step closer to significantly improving supply for its blockbuster weight loss drug Wegovy and diabetes treatment Ozempic.
The Danish drugmaker's parent company, Novo Holdings, got approval from European antitrust regulators last week to move forward with its proposed $16.5 billion buyout of U.S.-based drug manufacturer Catalent - a deal that had raised concerns among both rival drugmakers and lawmakers.
That leaves the U.S. Federal Trade Commission as the last hurdle Novo Holdings needs to overcome to cement the colossal deal, which it announced in February. Novo Holdings and Novo Nordisk said they expect the transaction to close at the end of the month.
Catalent is an attractive buyout target for Novo Holdings, which owns 77% of the voting shares in Novo Nordisk.
The deal could boost availability of the drugs because Catalent is the main supplier of fill-finish work, which involves filling and packaging syringes and injection pens for Wegovy and Ozempic. Novo Holdings will immediately sell three Catalent sites for $11 billion to Novo Nordisk after the deal closes, making the drugmaker more equipped to match soaring demand for its products.
"In the obesity arms race, capacity remains king and the close of this deal could meaningfully accelerate Novo's ability to supply this growing market," BMO Capital Markets analyst Evan Seigerman wrote in a note on Friday. "Novo underscored last quarter that it continues to see no issues with patient demand, and with every dose spoken for, capacity is the key bottleneck in the growth of its GLP-1 franchises."
The European Commission, the executive arm of the European Union, specifically said the transaction would not pose a considerable competitive threat. The commission said drugmakers will still have access to several alternative manufacturers of prefilled syringes and orally disintegrating tablets.
"The transaction would not lead to customers lacking sources of supply alternative to Catalent," the Commission maintained, noting that "there is sufficient spare capacity in the market."
Competing drugmakers have pushed back on the deal.
Earlier this year, Eli Lilly was the first to suggest it could pose issues since the company is a key rival of Novo Nordisk in the weight loss drug space. In August, Eli Lilly CEO David Ricks also told analysts the company relies on one Catalent site for some production, but that "it's more the oddity of your main competitor being also your contract manufacturer and how to resolve that situation."
Roche's top executive Thomas Schinecker also said in a media call in October that the Catalent deal would not affect the company, but "could be a problem for other smaller players." He said limiting competition in the weight loss drug space, which Roche is racing to join, is "not a good idea."
Also in October, a coalition of more than 10 unions, public interest organizations and consumer groups wrote a letter to FTC Commissioner Lina Khan urging her to "challenge this transaction" and ensure that "competition is protected and that consumers will have full access to treatments."