As anticipated in our 2024 outlook, demand for GLP-1 drugs, which are used to treat type 2 diabetes and promote weight loss, is sending shockwaves through healthcare industries and has led to significant M&A activity during the first half of 2024, including Roche’s acquisition of Carmot Therapeutics, which was completed in January 2024. Biotech companies that can innovate in this space, especially those focused on providing an oral delivery method, will be in high demand. Established GLP-1 players have also used M&A to increase manufacturing capabilities to meet the sky-high demand for these drugs. For example, Novo Nordisk’s proposed $16.5 billion acquisition of a contract manufacturing organization, Catalent, and Eli Lilly’s proposed acquisition of an injectable drug manufacturing facility from Nexus Pharmaceuticals are aimed at increasing production capacity.
We do not believe that these deals, which are aimed at bringing in-house manufacturing capacity, are the beginning of a broader trend in the pharmaceutical industry. Rather, they are likely to be specific to the supply shortage resulting from massive demand for GLP-1. Other pharmaceutical companies are likely to continue to pursue lean, asset-light production strategies, outsourcing production to contract manufacturing companies.
The broader pharmaceutical and life sciences industry is closely monitoring demand for these GLP-1 drugs, as the ripple effects of their widespread adoption can be far-reaching, affecting demand for products and services that currently treat diabetes, sleep apnea, cardiovascular disease, and other conditions. Several pharmaceutical services companies have already expanded their networks and capabilities to reposition themselves for the anticipated growing demand for GLP-1-related services.
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