Lilly builds $2.5 billion drug plant in Germany amid obesity drug boom

By Klaus Lauer and Ludwig Burger

BERLIN (Reuters) -Eli Lilly will build its first plant in Germany for 2.3 billion euros ($2.5 billion) in the western town of Alzey, the U.S. pharmaceuticals maker said on Friday, as the sector scrambles to meet 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 injection pens to administer them, the U.S. group 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.

Eli Lilly and Danish rival Novo Nordisk 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.

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, speaking 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.

The U.S. group said that 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 Lilly site in Fegersheim, France.

As well as winning U.S. approval for weight-loss, Mounjaro is also likely to be approved for that use in the European Union after the bloc's drugs regulator recommended market clearance.

However, in Germany, the state health insurance system is barred by law from paying for weight-loss drugs. Non-diabetic patients with a prescription for weight loss will likely have to pay for Mounjaro out of their own pockets.

Health Minister Lauterbach said at press conference on Friday that 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 investment comes even as major pharma 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 from 10 to eight years.

Major production sites that Lilly runs outside of its U.S. home market are in Ireland, France, Spain, Italy and China.

The U.S. 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, said Lilly.

(Additional reporting by Patrick Wingrove; Editing by Matthias Williams, Jason Neely and David Evans)