Manufacturing Capacity Emerges as Key Battleground in Obesity Drug Market

Incumbents Invest Heavily to Maintain Edge

Eli Lilly and Novo Nordisk, the current leaders in the GLP-1 weight-loss drug market, are significantly ramping up their manufacturing capabilities to meet soaring demand and fend off upcoming competition. Lilly's capital spending increased by nearly 50% in 2024, reaching over $5 billion, with a focus on expanding global production facilities. The company acquired a $924.7 million injectable manufacturing facility in Wisconsin and committed to a $3 billion expansion program at the site.

Lilly views these investments as a strategic move to ensure product supply and strengthen its market position. A company spokesperson stated, "Our state-of-the-art facilities, combined with our years of expertise, allow us to produce high-quality products efficiently and at scale. 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."

Novo Nordisk, while facing some challenges, has also bolstered its manufacturing footprint. The company acquired three fill-finish sites as part of its parent company's $11.7 billion takeover of Catalent, aiming to expand capacity and increase flexibility in its supply network.

Challengers Argue for Innovation Over Scale

Despite the incumbents' significant investments, aspiring competitors in the obesity drug market argue that manufacturing science expertise can reduce the barriers to entry. Metsera CEO Whit Bernard contends that improvements in yield or lowering effective doses can make newcomers competitive despite Lilly and Novo's head start.

Bernard explained, "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. 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."

To compete with the established players, latecomers are exploring various strategies. Metsera has partnered with generics company Amneal to build two manufacturing facilities in India, while Viking Therapeutics entered into a long-term supply agreement with CordenPharma.

Market Dynamics and Future Outlook

The obesity drug market is poised for increased competition, with a wave of new entrants expected from 2028 onward. This influx of competitors is likely to impact pricing strategies and market dynamics. Lilly CFO Lucas Montarce predicts that price erosion will continue, but argues that the company's investments will position it strongly to compete on price.

Montarce stated, "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. 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."

While incumbents like Lilly and Novo Nordisk are betting on their manufacturing scale as a competitive advantage, smaller companies remain optimistic about their ability to innovate and compete. Metsera's Bernard summarized this sentiment: "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. It's just an exciting innovation opportunity."

As the obesity drug market continues to evolve, manufacturing capacity and efficiency will likely play a crucial role in determining market leaders and shaping the competitive landscape in the years to come.