Weight-loss drugs fuel boom for firms that fill syringes. Contract pharma makers are spending billions of dollars to develop or construct facilities that fill the injectable pens used to give treatments like Novo Nordisk’s (NOVOb.CO) Wegovy to capitalize on the rising demand for weight-loss medications.

Interviews with a dozen business executives, analysts, and investors revealed that pharmaceutical service providers are vying for more specialized fill-finish work—filling the syringes used in the pens.

Tejas Savant, the senior healthcare equities analyst at Morgan Stanley, stated, “Every contract manufacturer with sterile fill-finish capacity wants to add more, to get ahead, because it’s not just about Wegovy anymore.” “You also have Lilly’s Mounjaro coming and others.”

Since its introduction in the United States in June 2021, sales of Wegovy, the first of a new series of obesity therapies that imitate the body’s appetite-suppressing hormones, have skyrocketed. This year, the United States is anticipated to approve Eli Lilly’s (LLY.N) Mounjaro for weight reduction.

The weekly weight-loss injections are a member of the GLP-1 agonist medicine class, which experts predict would reach a market value of $100 billion within ten years and include the oral therapies now being investigated by Pfizer (PFE.N) and other companies. According to Chris Chen, CEO of WuXi Biologics (2269. HK), his business is in discussions with clients about using the pre-filled syringe capacity it is constructing at a German plant it acquired in 2020.

He described interest as being “pretty high” and stated that he plans to purchase other plants in Europe to service GLP-1 clients, but he did not provide any further information. According to Cornell Stamoran, vice president of corporate strategy and government affairs at Catalent, the company is increasing “significant” pre-filled syringe capacity at its plants in Anagni, Italy, and Bloomington, Indiana, in the United States. In 2024, they will go online.

The American business already performs fill-finish work for Wegovy. Contract development and manufacturing organizations (CDMOs) started competing for business last year. Since then, other ventures, including Lonza (LONN.S), Fujifilm Diosynth Biotechnologies, a division of Fujifilm Corp., and Germany’s Vetter, have launched initiatives totaling at least $3 billion.

The pace is quickening as Lilly gears up to introduce Mounjaro, and Novo struggles to keep up with demand even as it expands the availability of Wegovy in new areas.

According to CEO Marc Casper, another Novo partner, Thermo Fisher (TMO.N), is transforming facilities to fill COVID-19 vaccination syringes to handle pens for obesity and diabetes medications.

He said that there was a severe capacity deficit. A firm representative declined to respond. All of the businesses contacted by Reuters declined to provide details about possible clients or contracts.

BETWEEN COVID AND OBESITY

When large pharmaceutical companies lack internal size or competence, they employ CDMOs. Before the assembly and packaging of pens and their subsequent shipment by wholesalers to pharmacies and clinics, syringes are filled in sterile conditions to prevent contamination.

With plans to open other contract manufacturing facilities besides the three managed by Catalent and Thermo, Novo is investing billions to boost production at its own Wegovy plant.

Still, shortages would persist until the next year. Lilly is also expanding its internal capabilities, although, at this time, a spokesman said, it employs an “extensive portfolio” of CDMOs; compared to Wegovy, Mounjaro’s medication trials showed more effectiveness.

The fill-finish industry is expected to more than quadruple to $12.5 billion between 2019 and 2027, according to research company The Insight Partners. A business expert says that is almost twice as fast as pills or capsules.

Fresh GLP-Executives said that one firm could more than make up for the lost COVID-19 vaccination contracts.

The development of biological medications, some of which are injected, is also being accelerated under the U.S. Inflation Reduction Act. Many new Alzheimer’s and generic arthritis medications are injected, and injectables are used more often in settings where older people get care.

GLP-1s, however, are the main driver of investments, according to the firms. Given that many projects won’t be finished until 2019 or, in some circumstances, 2026, supply shortages are expected to continue. According to a healthcare investor, how quickly the market for obesity drugs expands will depend on CDMOs’ capacity expansion.

Because of their current capabilities, Catalent and Thermo are “in the catbird seat” dominating the industry in the interim, according to Barclays analyst Luke Sergott. According to LSEG statistics, Catalent shares are trading 42 times predicted earnings over the next 12 months, greater than Lonza’s and Thermo’s multiples of 28 and 21, respectively. This reflects Catalent’s leadership in the obesity market despite certain quality difficulties. According to Reuters in July, wegovy shortages were reportedly brought on by quality issues at Catalent’s Brussels manufacturing.

Executives said there wouldn’t be a surplus due to the capacity race. “Based on my 30 years in the field, CDMOs don’t operate under the ‘build it, and they will come’ theory. That’s not how you create a CDMO company that will endure, according to Stamoran of Catalent.