Novo Holdings Buys Catalent for GLP-1 Capacity

Novo Holdings agreed to acquire pharmaceutical contract development and manufacturing organization Catalent in a deal that values the business at $16.5 billion, including debt. The purchase price represents a 16.5 percent premium to the prior closing price and a nearly 40 percent premium to August 28th’s closing price, the last day of trading prior to Catalent’s announcement of a strategic review.

Novo Nordisk’s Supply Struggles

Novo Holdings is a holding company and investment firm set up to manage the assets of the Novo Nordisk Foundation, whose $114 billion endowment makes it the world’s largest philanthropic organization.

Alongside various healthcare-focused public and private investments, Novo Holdings holds a controlling interest in pharmaceutical company Novo Nordisk.

As part of the Catalent deal, Novo Nordisk has agreed to pay its parent company $11 billion to acquire three Catalent manufacturing facilities in Italy, Belgium, and Indiana. Novo Nordisk and Catalent already work together at the three fill-finish production sites, which help produce the company’s GLP-1 weight loss drugs Ozempic and Wegovy.

GLP-1 demand has far outpaced supply, forcing Novo Nordisk to limit drug access as it works to ramp up production—the company had previously announced a $6 billion manufacturing capacity investment initiative, which today’s deal should accelerate.

Such efforts now have added urgency following the FDA’s November approval of Eli Lilly’s Zepbound, a similar compound that will likely further strain available GLP-1 outsourced capacity.

Novo Holdings will retain the remainder of Catalent’s nearly 50 sites, which have capabilities across small-molecule, biologics, and cell and gene therapies. With a deep life sciences portfolio, readily available access to manufacturing capacity could provide portfolio companies with some level of competitive advantage. That may be particularly true for emerging cell and gene therapies, a more complex category with manufacturing outsourcing rates nearing 70 percent (well above industry averages).

Catalent’s Resolution

Today’s announcement comes five months after the launch of Catalent’s strategic review, prompted by an approach from activist investor Elliott Management (who had negotiated for a seat on the company’s board).

Elliott’s involvement followed a string of challenges at Catalent, including executive turnover, delays in financial reporting, and a series of manufacturing mishaps. Relative to peers, the business was also particularly exposed to the fall-off in Covid-related business: 2023 revenue fell by nearly $540 million to $4.3 billion, with almost all the decline attributed to the company’s biologics division that produces Covid treatments and vaccines.

The timing of Catalent’s unraveling made it even more of a setback for shareholders than it otherwise might have been. Last year, life sciences business Danaher was rumored to be nearing a deal to acquire the company at a “significant premium.” It shelved those plans shortly after Catalent disclosed “productivity issues” at three major facilities.

Elliott’s stake was first reported by the Wall Street Journal in late July. From the date of that story, Novo’s offer implies a nearly 40 percent return to common, though Elliott’s actual performance likely differs. In response to today’s announcement, Elliott partner Marc Steinberg issued a statement saying the firm “fully supports” the transaction.

The deal is expected to close by the end of 2024. Citi, J.P. Morgan, and Skadden, Arps advised Catalent, while Jones Day advised Catalent’s board. Morgan Stanley and Goodwin advised Novo Holdings, and Evercore advised Novo Nordisk on the facilities purchase.

Sam Hillier

Sam Hillier is a reporter at Transacted covering private equity and investment banking. He previously spent time as an investment professional focused on direct buyouts, as well as an earlier strategic advisory stint.