(Bloomberg) -- Colorful terrace homes line the streets of Kinsale, a quaint fishing town on the coast of Ireland’s County Cork. Its population — nearly 6,000 — can double on sunny weekends as tourists enjoy the bustling restaurant scene, including Michelin-starred Bastion, and explore local landmarks like Charles Fort, a star-shaped 17th century battle fortress.
It’s here, roughly 10 minutes from town, that US pharmaceutical giant Eli Lilly & Co. is making its latest push to slake the unprecedented demand for its blockbuster drugs, Mounjaro and Zepbound. The company unveiled the results of its $800 million investment into the plant on Thursday, upgrades intended to help establish a reliable supply of the drugs that have experienced shortages since 2022, and announced a $1 billion expansion of its facility two hours north by car in Limerick.
The spending is part of what Lilly officials say is the most ambitious manufacturing expansion in the company’s nearly 150-year history, driven by the unprecedented demand for tirzepatide, the active ingredient in its injected weight loss medicines. Its speed and ferocity took everyone by surprise, including Chief Executive Officer David Ricks, despite the foreshadowing provided by a similar shock with Novo Nordisk A/S’s rival Wegovy.
“When we saw Wegovy launch, nobody predicted that, so we changed all our numbers,” Ricks said in an interview. “Then we launched tirzepatide, and uptake of tirzepatide was four times that. So who knew? Now we’re chasing that number.”
Manufacturing expansion is a key theme for the company in 2024 given the drug shortages, said Evan Seigerman, an analyst with BMO Capital Markets. Investors are closely tracking Lilly’s manufacturing capacity, even after the US Food and Drug Administration recently listed all doses of tirzepatide as available on its shortage list.
“Investment in these two locations in Ireland (Limerick & Kinsale) shows Lilly’s work is not done,” Seigerman wrote. “Even if US drug shortages seem to calm down, the expectation of high, ongoing demand remains.”
Explosive Demand
Lilly has been bulking up its capacity since 2020, investing more than $17 billion into new plants and existing facilities for the weight-loss and diabetes drugs that are expected to number among the best-selling medicines of all time. In Kinsale, a hybrid manufacturing approach was designed to make the delicate work of peptide production easier and increase output, according to the International Society for Pharmaceutical Engineering, which named it “Facility of the Year” for its innovation.
And it’s not just Ireland. New plants around the world will support all aspects of the drugs’ supply chain, from making the active ingredients to assembling the pen devices that patients use to inject them, the company said.
The need for such aggressive action stems from both high demand and questions about supply. Much of the active base ingredient used in Lilly’s Zepbound and Mounjaro has been made by WuXi AppTec Co., one of the main targets of the US Congress’ burgeoning crackdown on Chinese biotechnology companies. Meanwhile, demand for Lilly’s drugs and similar medicines from Danish drugmaker Novo Nordisk has proven insatiable.
The market is expected to reach $130 billion by the end of the decade, and both companies are racing to make as much of the drugs as they possibly can. So far, they’ve struggled to keep pace.
Shortages have left patients already on the medications frantically searching for their next dose and stymied those who want to start taking them. Limited supplies delayed the drugs’ launches in some countries and prevented Novo Nordisk from introducing a version of its drug that can be taken by mouth.
Lilly’s challenges, which stem in part from the complexity of making its autoinjector devices, appear to be improving. In addition to coming off the shortage list, it recently rolled out Zepbound vials that it expects to further ease supply constraints. The company is already seeing an influx of new prescriptions, Ricks said.
“We’ve come off the shortage list for each dosage form; we have announced the vial availability; we’ve seen a huge increase in new prescriptions,” Ricks said. “It’s almost like the supply stimulates demand.”
Now the drugmaker is trying to get on the front foot. It’s started building production capacity for its next-generation weight-loss medicines — experimental compounds that are still in clinical trials.
“That’s something we’ve never done,” Edgardo Hernandez, executive vice president and head of manufacturing, said in an interview in June at Lilly’s new manufacturing plant in Concord, North Carolina. “That’s how quickly we’re moving to make sure that we’re ready for the future.”
Emerald Isle
Lilly has a knack for buying old things and overhauling them. In the 1970s, the company purchased an old farmhouse in the countryside of West Cork, near Kinsale. It originally planned to build a €10 million manufacturing plant for agricultural products, employing 150 people, according to local reports at the time. But by the 1980s, around the time Lilly launched its bestselling depression drug Prozac, it had begun making medicines for people there.
Today, the sprawling 123-acre campus is home to several different types of manufacturing platforms, making active pharmaceutical ingredients both for clinical trials and commercial use. It employs over 1,200 people and has become an integral part of the community — even providing shelter to locals when a hurricane blasted the coast in 2017.
Tax incentives offered to foreign businesses originally lured US pharma giants to Ireland, and its educated English-speaking workforce, stable economy and government have kept them there. Pfizer Inc., AbbVie Inc., Amgen Inc., Regeneron Pharmaceuticals Inc. and others maintain major operations there, employing more than 45,000 people. Lilly archrival Novo Nordisk is there, too. The Danish drugmaker was planning to build a “mega manufacturing facility” outside of Dublin, before reportedly abandoning those plans in June.
Lilly’s newest plant in Ireland, the one in Limerick, the republic’s third-largest city, won’t be making weight-loss drugs. Instead, it’s focused on the recently launched treatment for Alzheimer’s disease, called Kisunla, as well as other biologic drugs. On Thursday, the company announced it would be investing another $1 billion to expand the Limerick plant, bringing in machine learning, AI and automated robotics to increase speed and efficiency.
“The treatments we will make here in Limerick offer the potential to be able to slow the progression of the disease and make life better for millions of people around the world,” Anne White, executive vice president and president of Lilly Neuroscience, said in a statement.
--With assistance from Jade Khatib and Jennifer Duggan.
(Adds CEO comment in the fourth paragraph)
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