Shares of Wegovy Partner Catalent Jump After Striking Deal With Activist Investor Elliott

A deal with activist investor Elliott Investment Management could help the company turn its fortunes around

By
Mack Wilowski
Mack Wilowski
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Mack Wilowski is a staff writer for Investopedia, focusing on breaking news stories, earnings previews, and company-specific insights and analysis. Previously, he was an associate editor for Investopedia's earned media team, where he covered the New York City Recovery Index and Economy Tracker, the weekly "What to Expect" markets preview, The Investopedia Express and Green Investor podcast transcripts, and the Term of the Day newsletter.
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Published August 29, 2023
Catalent facility in Italy

Franco Origlia / Contributor / Getty Images

Catalent (CTLT) shares surged more than 5% in early trading on Tuesday after the struggling drugmaker secured a deal with activist investor Elliott Investment Management.

Key Takeaways

  • Struggling pharmaceutical company Catalent secured a deal with activist investor Elliott Investment Management.
  • The company is the main contract manufacturer of Novo Nordisk's fast-growing weight loss drug, Wegovy, for which demand has outstripped supply in recent months.
  • Catalent shares have shed more than half their value over the past year, and are down two-thirds from their peak in September 2021.

As part of a turnaround effort, Catalent appointed four new members to its board, formed a strategic review committee, and entered into an agreement with activist investor Elliott Investment Management. Catalent is the main contract manufacturer of Danish healthcare company Novo Nordisk's (NVO) fast-growing weight loss drug, Wegovy, and a deal could give Elliott some degree of influence over its production.

Use of Wegovy in the U.S. has surged in recent months, with hundreds of thousands of patients using it as a weight-loss medication. Soaring demand for the drug, along with Catalent's recent financial struggles, have contributed to a production shortage and prompted Novo Nordisk to limit deliveries of the drug to wholesalers.

Catalent has struggled financially in recent quarters, posting an $86 million loss in the quarter ended June, or a $232 million loss for the latest fiscal year. The company lost its Chief Financial Officer (CFO) in April after warning of "productivity issues and higher-than-expected costs" at its manufacturing facilities, and delayed the release of third-quarter earnings.

"We are dissatisfied with our recent results and are taking the necessary steps to address the issues that negatively impacted our performance, which fell well short of our prior projections," Alessandro Maselli, Catalent's president and CEO, said at the time.

It's a change of fortune from the early years of the pandemic, when Catalent played a critical role in the pandemic response by filling vials with the COVID-19 vaccine, and supplying vaccine makers such as AstraZeneca (AZN), Johnson & Johnson (JNJ), and Moderna (MRNA). By the end of 2021, the company had produced over a billion COVID-19 vaccines and treatments.

Amid its struggles, activist investors and private equity (PE) firms have taken an interest in Catalent in an effort to force a turnaround. Activist investors, or shareholder activists, are firms that buy a minority stake in a company in an attempt to change how it is run. Their goals could be as modest as advising the company's management or as ambitious as forcing a sale and replacing the board of directors.

Catalent shares have shed half their value over the past year, and are down two-thirds from their peak in September 2021.

Catalent (CTLT) 1-Year Return

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  1. Business Wire. "Catalent Announces Governance Enhancements and New Initiatives to Drive Value."

  2. Novo Nordisk. "Updates About Wegovy."

  3. Catalent Inc. "Catalent, Inc. Reports Preliminary Fourth Quarter and Fiscal 2023 Results."
  4. Catalent Inc. "Catalent Delays Third Quarter Results and Conference Call and Provides Update on Fiscal 2023 Guidance."

  5. Catalent Inc. "Catalent Delays Third Quarter Results and Conference Call and Provides Update on Fiscal 2023 Guidance."

  6. Catalent Inc. "Moderna and Catalent Announce Long-Term Strategic Collaboration for Dedicated Vial Filling of Moderna’s COVID-19 Vaccine and Clinical Portfolio."

  7. Catalent Inc. "Catalent COVID-19 Response."

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