Weight-loss drugs in spotlight as pharma services firms rush to snap up business

By Maggie Fick

BARCELONA (Reuters) – Soaring demand for obesity drugs was in the spotlight at the world’s largest trade show for the pharmaceutical services industry this week, as it fuels a boom for firms that fill and assemble the self-injection pens.

A surge in sales of Novo Nordisk (NYSE:)’s drug Wegovy, which launched in the United States in mid-2021, has propelled the Danish drugmaker to become Europe’s most valuable company.

U.S. rival Eli Lilly (NYSE:) has become the world’s most valuable healthcare firm this year as demand for its diabetes drug Mounjaro surges ahead of approval for its use as a weight-loss treatment in the United States, expected by the end of this year.

Amid a global obesity crisis, some analysts predict the market for weight-loss drugs could be worth $100 billion by 2030.

Some companies, like West Pharmaceutical Services (NYSE:), whose share price is up 37% year to date, are already providing components for the injections pens and reaping rich rewards from the business. Other companies specializing in parts of the manufacturing process for the injections are vying to get a bigger foothold by scaling up their capacity.

Wegovy and Mounjaro, both administered once weekly, are part of a class of drugs called GLP-1 receptor agonists originally developed for type 2 diabetes, which suppress appetite.

“Having capacity to serve GLP-1 manufacturing demand now is gold, and there is a little bit of an arms race to capture that market share,” Tommy Erdei, a senior healthcare investment banker at Jefferies, said ahead of the CPHI trade show, held in Barcelona this week.

The specialist process of filling the syringes used in the pens, called aseptic or sterile fill-finish, is particularly in demand.

Thermo Fisher (NYSE:) is converting a building that manufactures tablets and pills at its North Carolina factory in the United States to do sterile fill-finish work instead, a company spokesperson said.

Three sources familiar with the matter said the site would handle GLP-1 business. They would not name the client, but Thermo is already filling Wegovy pens at the factory.

Other pharma services companies are following suit.

FUJIFILM Diosynth Biotechnologies, a subsidiary of Japan’s Fujifilm Corp, expects to announce by the end of this year a major contract with a company for sterile fill-finish work at its expanded facilities in Texas and Denmark, CEO Lars Petersen told Reuters.

While big pharma companies have often outsourced parts of their manufacturing to save money, they are now relying on contract drugmakers’ expertise in newer technologies like sterile fill-finish, said Andre Valente, a partner at L.E.K. Consulting’s London office who advises investors on healthcare.

The boon, which is helping offset the loss of lucrative COVID-19 vaccine contracts for many pharma services companies, was a hot topic at the trade fair particularly as Novo and Lilly have not released many details on their manufacturing supply chains or their partners. Nor have the two companies detailed plans to scale up in-house manufacturing, even as they spend billions to increase output.

In a further sign of how the new weight-loss drugs could upend healthcare, some companies who profit from treating obese and overweight patients are trying to convince investors that the new drugs won’t shrink their businesses.

BIG OPPORTUNITIES

Catalent (NYSE:) told Reuters earlier this month it has a new sterile fill-finish capacity coming online at its plant in Italy in 2024. A source at the trade show said construction of another manufacturing line at that site was likely to begin as soon as the current work finishes.

The company already fills for Novo at its factories in Belgium and the United States.

PCI Pharma Services, which assembles and packages self-injection devices, has invested hundreds of millions of dollars over the past five years to position itself to meet demand it saw coming for GLP-1 drugs, said CEO Salim Haffar.

The company estimates it will have capacity to handle about half of the volume for device assembly for obesity and diabetes medicines that will be on the market in the class by 2030, he said. He declined to quantify further.

Lilly’s diabetes drug Mounjaro could also give a boost to companies which make active pharmaceutical ingredients (API) with expertise in peptide manufacturing, executives said. Novo makes its API in-house.