The FDI angle:

• Eli Lilly has more than quadrupled its original investment in Indiana from $2.1bn to $9bn as demand soars for its injectable weight loss drugs.
• Why it matters: Alongside its Danish competitor Novo Nordisk, Eli Lilly has announced billions of dollars investment in the US and Europe to meet soaring appetite for safe, effective obesity drugs.

US pharmaceutical giant Eli Lilly’s recent decision to increase its investment commitment from $3.7bn to $9bn in its home state of Indiana adds new momentum to the investment spree by drugmakers to boost production of popular weight loss drugs.

The company committed on May 24 to deploy a further $5.3bn into facilities at the Lebanon Innovation and Research District in Boone County. This follows an expanded capital pledge barely a year earlier. Relative to an initial $2.1bn announcement made in May 2022, Eli Lilly has more than quadrupled its planned investment into Indiana manufacturing facilities.

David Ricks, Eli Lilly’s CEO, announced that the project “tops the largest manufacturing investment in [the drugmaker’s] history”. The multi-site campus will boost its capacity to make active pharmaceutical ingredients needed for its injectable drugs for weight loss (Zepbound) and type 2 diabetes (Mounjaro), which are currently in short supply due to high demand. 

ELI LILLY EXPANSION IN INDIANA

• Location:Lebanon, Boone County, Indiana, US
• Sector: Pharmaceuticals
• Investment pledge:$9bn
• Site size: 500 acres
• Expected production start:2026
• Expected job creation 900 full-time employees, 5000 construction jobs

Cardiometabolic diseases like diabetes, heart attacks and strokes are among the most common but often preventable diseases, meaning drugs that treat them have huge potential markets. A new class of drugs, known as GLP-1s, were initially developed to treat diabetes but clinical trials have found them to be effective at helping patients lose weight.

JPMorgan Research forecasts that the GLP-1 market will exceed $100bn by 2030 driven by diabetes and obesity drug usage, with as much as 9% of the US population being GLP-1 users. Another investment bank, BMO Capital Markets, expects the combined drug market to reach $150bn by 2033. 

“Five years ago, diabetes drugs were for diabetes patients. Now with the spectacular [clinical trial] results for Zepbound and other novel structures, there is an extreme level of interest in the obesity space,” says Evan Seigerman, managing director of biopharma equity research at BMO Capital Markets, who adds what is different is there are finally “safe, effective obesity medicines” after decades of weight loss drugs with safety issues.

Strong appetite for these new drugs has catapulted Eli Lilly and its Danish competitor Novo Nordisk, which has its own drugs for diabetes (Wegovy) and weight loss (Ozempic), into the limelight against a backdrop of biopharma job cuts at companies like Bristol Myers Squibb, Novartis and Genentech. Amid booming obesity medicine demand, the market value of Eli Lilly and Novo Nordisk has skyrocketed, and both companies committed billions to bolstering their productive capacity and supply chains. 

“These two companies are working as hard as they can to get as much capacity [as possible],” says Mr Seigerman of BMO Capital Markets. Due to a shortage of supply, Mr Seigerman says that their respective shares of the weight loss market will be determined by how much product either company is able to produce.

In February 2024, Novo Nordisk paid $11bn for three fill-finish sites in Europe and the US, where medicines are packaged before being distributed, from contract manufacturer Catalent, which had been acquired in a three-way transaction by its parent company Novo Holdings. These sites are expected to increase the Danish drugmaker’s filling capacity from 2026 onwards. In 2023, Novo Nordisk also pledged to invest more than DKr75bn ($10.9bn) to expand its existing production sites in Denmark and France. 

Following its latest expanded investment announcement in Indiana, Eli Lilly has now committed more than $16bn to build new manufacturing sites in the US, Ireland and Germany since 2020, according to company’s figures. Damien Conover, the director of healthcare equity research at Morningstar, says that alongside soaring demand, Eli Lilly’s ramp up of investment reflects the higher complexity and costs of producing injectable drugs compared with oral medicines like pills. 

“Most competitors are not as advanced as Lilly and Novo [in weight loss and diabetes medicines],” explains Mr Conover, who notes that many pharma companies had pivoted towards oncology and rarer diseases. But now demand for these drugs is proven, lots of pharmaceutical firms are trying to get a slice of the growing weight loss market, including US biotech Amgen, Pfizer and German drug company Boehringer Ingelheim.

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