Why Novo Nordisk’s Ireland expansion is key to fighting Eli Lilly

Novo Nordisk The Danish drugmaker said on Monday it is investing 432 million euros ($506 million) in a facility in Ireland as it expands its production capacity to make its newly launched Wegovi pill.

The news comes two months after Novo launched its blockbuster weight loss drug Wegovi in ​​pill form on the US market, one of the strongest launches ever.

“With the investment in the Athlone facility, Novo Nordisk is expanding its manufacturing capacity for oral products, which will strengthen our ability to meet current and future demand outside the US,” said Kasper Bødker Mejlvang, Novo’s executive vice president of chemistry, manufacturing and controls and product supply.

This follows Novo Nordisk losing market share Eli LillyAnd investors doubt it has enough hope to win back its pipeline. The stock has fallen as a result and is currently trading at roughly a quarter of what it did at its peak in mid-2024.

“The investment is a sign of Novo Nordisk’s increasing focus and bet on the oral space — an area where Novo has an edge,” GSK Bank analyst Henrik Hallengreen Lastsen told CNBC on Monday.

Novo enjoyed a first-mover advantage in the anti-obesity market and launched its GLP-1 drug semaglutide, marketed as Ozempic and Vegovi, years before Lilly’s rival drug.

However, it misjudged the demand for its weight loss jabs. Because of the semaglutide shortage, compounding pharmacies were allowed to thrive through a loophole in US regulations that allowed them to legally manufacture patented drugs during shortages.

Supply issues were resolved as Novo increased production capacity. Even so, compounders continue to sell cheap copycat versions of the drug, and this is still weighing on Novo’s sales. The company has been involved in many legal battles over intellectual property.

Novo has repeatedly said it has enough Vegovi pill supply to meet demand in the US, the only market where it has been launched so far.

With the new Ireland investment, Cidebank analyst Søren Lontoft Hansen says Novo will be challenged to meet demand for the pill globally.

Hansen said Novo’s Monday announcement about expanding manufacturing capacity reflects its desire to launch the pill in other countries. It is currently under review by the European Medicines Agency and potential approval is expected by the end of the year.

“It also reflects a very successful launch in the US, probably the best launch of a drug,” Hansen told CNBC.

According to Barclays analysts who closely track Wegovy’s consumption, US Wegovy pills are outpacing initial rollouts of existing GLP-1 injections. Novo CEO Mike Doudstar told CNBC in mid-February that 246,000 patients were taking oral Wegovi.

Shares of Novo were down about 1.2% on Monday, hitting a fresh 52-week low.

“It looks like a drop in the ocean from the share price reaction, but it signals confidence in this VeGovi pill and, capacity-wise, they need more to meet future demand outside the U.S.,” Hansen said.

“We wouldn’t be investing in factories in Ireland if we were going to throw in the towel,” CEO Mike Dousther said in February, according to a Bloomberg report.

The market is waiting for Lilly to release its rival weight loss pill, or Forglipron, in the second quarter of this year before making a call on the Wegovy pill’s future prospects.

Construction projects in Ireland have already started and will be gradually finalized throughout 2027 and 2028, Novo said. This includes capacity expansion and technical upgrades of existing facilities.

According to Laustsen, the site is likely to focus on oral zenagamtide and amycretin, both experimental drugs developed by Novo. “The expected launch in 2029 and increasing focus on oral opportunities in the obesity market aligns well with Novo’s strategic aspect,” he said.