Lilly intends to build a $2.5 billion factory in Germany as demand for obesity drugs rises

BERLIN, Nov 17 (Reuters) – U.S. drugmaker Eli Lilly said on Friday it would build its first factory in Germany in the western town of Alsee for 2.3 billion euros ($2.5 billion), as the sector struggles to meet its needs. Growing demand for new treatments for diabetes and obesity.

The investment, which Reuters reported on Wednesday and Thursday, will help boost production of diabetes and obesity drugs including Mongaro and Trulicity and injection pens to administer them, the Indianapolis-based company said.

“The German workforce will play a vital role in enhancing Lilly’s concrete supply when the new site becomes operational starting in 2027,” Lilly said in a statement on Friday.

Incretins are peptide-based medications such as Mongaro that mimic gut hormones to suppress appetite and stimulate insulin secretion.

The diabetes drug Mongaro, which has been used off-label for weight loss, was approved last week in the United States and can now be promoted by Lilly as an obesity treatment.

Eli Lilly and Danish rival Novo Nordisk (NOVOb.CO) are leading a race to capture a future global market worth an estimated $100 billion for anti-obesity treatments. Novo said the industry is far from producing enough to meet demand, and Lilly also acknowledged supply constraints.

“Rapid access” to new treatments

Plans for Lilly’s first major production complex in Germany come as drugmakers become increasingly sensitive to political pressure to manufacture critical health care products close to the markets they serve after the coronavirus pandemic exposed the vulnerability of global supply chains.

“This investment encourages the government in its efforts to make Germany more attractive as a pharmaceutical hub,” Health Minister Karl Lauterbach said at a press conference in Berlin.

“By doing so, we will ensure rapid access to new treatment options and reduce reliance on fragile supply chains,” he added.

Lilly said its skilled workforce and existing infrastructure were among the factors that contributed to the choice of location, as was the opportunity to form a manufacturing complex with a company site in Wegersheim, France.

Lilly’s factories in France and Italy also produce incretin drugs like Mongaro, manufacturing chief Edgardo Hernandez said in an interview.

“There is a lot of engineering and science (in Germany) and many of our equipment manufacturers are based there,” he said.

The weight-loss drug Mongaro is likely to be approved in the European Union after the bloc’s medicines regulator recommended clearing the market for this use.

However, in Germany, the state health insurance system is prohibited by law from paying for weight loss medications. Patients without diabetes who get a weight-loss prescription will likely have to pay for Monjaro out of their own pocket.

Lauterbach said on Friday that any review of these rules is not currently on the agenda.

Lilly said it has announced investments of more than $11 billion in global manufacturing over the past three years.

According to the third quarter report, the company has committed more than $8 billion to continued expansion investments in Indiana, North Carolina and Limerick, Ireland over the next several years.

The drugmaker also said in its report that it expects supply constraints for some time as it adds manufacturing capacity, and in an interview the same day it asked doctors outside the US to stop putting new patients on Trulicity to handle increased demand.

This investment comes at a time when major pharmaceutical companies have expressed strong opposition to European Union plans to shorten the standard period of protection that companies get before generic drugs can enter the market to eight years from 10 years.

Despite Lilly’s objection to the law, Hernandez said the drug company wants to invest in the area “to help push the conversation in another direction.”

Lilly operates major display locations outside its home US market in Ireland, France, Spain, Italy and China.

The company, which has been present in Germany since 1960, already has 1,000 employees in the country in areas such as development, distribution, marketing and administration.

Lilly said the new Alzi site will employ up to 1,000 highly skilled workers such as engineers, technicians and scientists.

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