By Klaus Lauer and Ludwig Burger
BERLIN (Reuters) -Eli Lilly will build its first plant in Germany in the western town of Alzey for 2.3 billion euros ($2.5 billion), the U.S. drugmaker said on Friday, as the sector scrambles to meet soaring demand for new diabetes and obesity therapies.
The investment, which was reported by Reuters on Wednesday and Thursday, will help boost production of diabetes and obesity drugs including Mounjaro and Trulicity and the injection pens to administer them, the Indianapolis-based company said.
"Germany's workforce will play a vital role in bolstering Lilly's incretin supply when the new site is operational beginning in 2027," Lilly said in a statement on Friday.
Incretins are peptide-based drugs such as Mounjaro that mimic gut hormones to suppress appetite and stimulate insulin secretion.
Diabetes drug Mounjaro, which has been used off-label for weight loss, was last week cleared for that additional use in the United States and can now be promoted by Lilly as an obesity treatment.
Eli Lilly (NYSE:LLY) and Danish rival Novo Nordisk (NYSE:NVO) are leading a race to seize an estimated $100 billion future global market for anti-obesity treatments. Novo has said that the industry is far from producing enough to meet demand, and Lilly has also acknowledged supply constraints.
'FAST ACCESS' TO NEW THERAPIES
Plans for Lilly's first major production complex in Germany come as drugmakers are growing increasingly sensitive to political pressure to manufacture critical healthcare products closer 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 centre," said Health Minister Karl Lauterbach at a press conference in Berlin.
"By doing that, we will secure fast access to new therapy options and reduce dependency on fragile supply chains," he added.
Lilly said a skilled workforce and existing infrastructure were among the factors in picking the location, as was the opportunity to form a manufacturing cluster with a company site in Fegersheim, France.
Lilly plants in France and Italy also produce incretin drugs like Mounjaro, manufacturing head Edgardo Hernandez said in an interview.
"There is so much engineering and science (in Germany) and many of our equipment manufacturers are located there," he said.
Mounjaro is likely to be approved for weight loss in the European Union after the bloc's drugs regulator recommended its market clearance for that use.
However, in Germany, the state health insurance system is barred by law from paying for weight-loss drugs. Patients without diabetes who get a prescription for weight loss will likely have to pay for Mounjaro out of their own pockets.
Lauterbach on Friday said any review of those rules were currently not on the agenda.
Lilly said it had announced investments of more than $11 billion in global manufacturing in the past three years.
According to its third-quarter report, the company had earmarked more than $8 billion for ongoing 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 a interview on the same day that it asked doctors outside the U.S. to stop putting new patients on Trulicity to cope with increased demand.
The investment comes even as major drug companies have voiced strong opposition to plans by the European Union to shorten the standard period of protection companies get before generics can enter the market to eight years from 10.
Despite Lilly's objection to the law, Hernandez said the drugmaker wanted to invest in the region to "help drive the conversation in another direction."
Lilly runs major projection sites outside of its U.S. home 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.
The new Alzey site will employ up to 1,000 highly skilled workers such as engineers, technicians and scientists, Lilly said.