Leaders at Eli Lilly believe heavy investment in the company’s manufacturing footprint “sets a high standard that newcomers may find challenging to match.” At least one of those newcomers disagrees.
For years, Eli Lilly and Novo Nordisk have invested heavily in the production of GLP-1 weight-loss drugs to try to keep up with soaring demand. Now, with a wave of challengers on the horizon, their manufacturing footprints are a potential advantage for the incumbents in a market that is poised to become increasingly competitive.
Capital spending at Lilly increased almost 50% last year compared to 2023, rising to over $5 billion as the company invested in global facilities to make existing and future products. The company paid $924.7 million to acquire an injectable manufacturing facility in Wisconsin in December 2024 and committed to a $3 billion expansion program at the site to support the production of drugs, including its diabetes and obesity products.
Lilly views investments in manufacturing as a way to both ensure product supply and strengthen its hand in the upcoming fight for market share with new entrants to the obesity market, a company spokesperson told BioSpace in an email.
“Our state-of-the-art facilities, combined with our years of expertise, allow us to produce high-quality products efficiently and at scale,” the spokesperson said. “This capability not only supports our ability to meet the demands of our customers, but also sets a high standard that newcomers may find challenging to match.”
Opinions are split on Lilly’s argument. Matt Phipps, a partner at William Blair, said earlier this year that the complexity of peptide manufacturing presents a barrier to new entrants. Phipps asked: “Are fast-followers going to want to spend $10 billion to have a facility that will be ready in four years that may produce an injectable only similar to Novo Nordisk and Lilly’s treatments?”
Yet executives at aspiring obesity companies such as Amgen and Metsera have made the case that manufacturing science expertise can reduce the investment needed to break into the space, arguing that work to improve yield or lower the effective dose will make them competitive despite Lilly and Novo’s head starts.
“Potency actually doesn’t matter in terms of efficacy—you can just use more drug to get to the same level of weight loss with a less potent drug—but it matters a lot in terms of dose,” Metsera CEO Whit Bernard told BioSpace. “If you’re doing the same amount of work at one-tenth to one-fifteenth the dose, you’re just manufacturing one-tenth to one-fifteenth the peptide, you’re reducing the cost of goods but, more importantly, you’re doing 10 times more work with every factory you build.”
Latecomers can, and are, accessing capacity at third parties to compete with the incumbents but the scale of the obesity opportunity is forcing them to go beyond transactional outsourcing. Metsera has partnered with the generics company Amneal to build two manufacturing facilities in India. Viking Therapeutics entered into a long-term supply agreement with CordenPharma.
Accessing capacity is only part of the challenge. New entrants must also be able to make products for a low enough cost to compete in a sector where prices are falling. Lilly believes it has an advantage in that regard, as CFO Lucas Montarce said at an investor event in May. Bank of America analyst Tim Anderson asked Montarce how the “flood of new entrants coming into the [weight loss] category” from 2028 onward will affect price erosion, given that “they’ll all be desperate to gain share [and] the only lever they’ll likely be able to pull is the price lever.”
Montarce predicted that price erosion will be a continuation of the downward trend Lilly has seen in recent years. A range of variables affect price erosion, the Lilly CFO said, and competition will be a bigger factor in the future. As new products launch, Montarce argued that Lilly’s investments will put the company in a strong position to compete on price and that new entrants will face challenges because manufacturing scale will affect their margins and, by extension, the price they can profitably charge.
“They will need to also think about how they manage their gross margin, how they manage their levels, and they will start with a small piece of share,” Montarce said. “From the gross margin perspective, they will have less flexibility to adjust their prices significantly down to where the prices will be at that time.”
Novo’s Struggles
For now, Lilly is competing chiefly against Novo Nordisk in the obesity space. Novo was first to market, winning FDA approvals for its GLP-1 agonist semaglutide in diabetes in 2017 and in obesity in 2021, but has since lost ground to Lilly as its competing products were approved. The Danish drugmaker has lowered its forecast growth for 2025 from 13%–21% to 8%–14% amid pressures on its GLP-1 drugs. Lilly, meanwhile, expects full-year sales to grow 32% at the midpoint of its range, driven by demand for its obesity and diabetes drugs.
Manufacturing capacity is one potential contributor to Novo’s problems. Novo’s first-to-market advantage was dampened by the more than 1,000 days that semaglutide was on the FDA’s drug shortage list. Lilly’s tirzepatide faced supply problems, too, but spent around 300 fewer days on the shortage list. Novo declined to answer questions about its manufacturing capabilities for this article.
Novo has strengthened its manufacturing footprint, notably through the $11.7 billion acquisition of three fill-finish sites in conjunction with its parent company’s takeover of Catalent. The Danish drugmaker said the acquisition is expected to enable an expansion of manufacturing capacity, “provide future optionality and flexibility” for its existing supply network and gradually increase fill-finish capacity.
Despite the investment, Novo’s outlook for 2025 reflects the expectation of continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. The company lowered its projected sales and operating profit for 2025 in July.
On a conference call to discuss the revised outlook, Danske Bank analyst Carsten Lønborg Madsen asked about the implications of Novo’s “huge” capital spending program and slowing sales growth. Madsen asked whether Novo will write down the value of its assets if it has excess semaglutide production capacity. Novo CFO Karsten Munk Knudsen made the case that the company can fill the facilities.
“We believe that we will have a good use of the factories that we’re putting in place,” Knudsen said. “The factories we are building are, of course, for the in-line products that are on the market today but . . . they are based on technologies that we expect to be able to apply for our pipeline products. So, at this point, there are no indications of any potential write-downs.”
The Next Wave
Novo’s future pipeline products such as CagriSema and amycretin could compete against medicines from late entrants to the obesity sector. Companies ranging from larger pharmas like Roche to three-year-old startups such as Metsera are lining up to challenge the incumbents. Bernard is bullish on the potential for smaller companies to overcome the manufacturing moats, citing factors such as the ability to access scale through partnerships and reduce capacity demands through peptide engineering.
“The big guys are leading the way, which is phenomenal and laudable. Those of us coming in their wake should not be intimidated to take this on in any way,” Bernard told BioSpace. “It’s just an exciting innovation opportunity.”
