Eli Lilly & Co. will spend US$5.3 billion to boost production of a key ingredient in its weight-loss and diabetes shots after the treatments’ explosive popularity led to shortages.

The manufacturing investment, the largest in the company’s almost 150-year history, will expand a site in Indiana that makes tirzepatide, the active ingredient in Zepbound for weight loss and the diabetes blockbuster Mounjaro. The new facilities should be ready to start making drugs in 2028, Lilly Chief Executive Officer Dave Ricks said in an interview with Bloomberg at the Indiana Global Economic Summit in Indianapolis. 

Lilly’s project adds to existing expansion plans at the site that are expected to come online in two years. It’s the latest high-profile example of a manufacturing renaissance underway in the U.S. Companies, particularly those involved in sensitive sectors like health care, are bringing more of their processes back to American shores, making supply chains shorter, more resilient and less prone to disruptions from escalating geopolitical tensions. 

“To have the research occur here in Indiana, and then to have the production, the manufacturing of these products, and then the distribution — we can own it all, and it can be right in the center of America,” Indiana Governor Eric Holcomb said in an interview. Ricks detailed plans for the new investment in a fireside chat with Holcomb at the event.

Efforts to encourage local manufacturing, which can also curtail what the U.S.sees as China’s outsized influence in key sectors, is core to President Joe Biden’s economy-focused bid for reelection. Lilly’s investment “is creating good jobs that will have a meaningful, lasting impact on communities and families across the country,” Health and Human Services Secretary Xavier Becerra said in a statement. 

Indiana has been a major beneficiary of the effort, enticing advanced manufacturing businesses like biotechnology, aviation and renewable energy to the state. Last year, it attracted almost $29 billion in committed capital investment, up from just $8.7 billion three years ago, according to Holcomb.

Market Battle

At the same time, Lilly has been locked in a battle with Danish rival Novo Nordisk A/S to dominate the market for weight-loss drugs, which Bloomberg Intelligence analysts estimate could surpass $80 billion by 2030. Surging demand for the treatments have made both companies some of the most valuable in the world and, despite pouring billions of dollars into boosting output, they’re struggling to keep up.

Just months after Lilly launched Zepbound last year, the Food and Drug Administration said it was in shortage. Patients and pharmacies have consistently complained about the difficulties in getting the medicine. Eight weeks after Lilly launched Zepbound, demand was four times higher than it had expected. 

“Our workers come every hour of every day to every plant in the world to make more,” Ricks said. “We’re operating above the theoretical capacity of those sites right now. That’s what you’re seeing in the marketplace.” 

Lilly’s supply bottlenecks have been linked to the complexity of making the plastic pens used to inject the drugs. But if demand continues to be strong, making enough of the active ingredient for the drugs could be a problem too, Chief Financial Officer Anat Ashkenazi said in an interview in April. The company is investing “ahead” to make sure that doesn’t happen, she said.

Limiting Launches

The company is limiting launches of the drugs outside the U.S. while capacity ramps up. Lilly has yet to launch Mounjaro for weight-loss in Europe, where it’s been approved for several months. The drug won approval in China for diabetes earlier this week, but Lilly “won’t launch it,” Ricks said. 

“We’re withholding launches in countries until we can catch up in the U.S.,” he said. Lilly is also telling U.S. physicians that if they keep starting new patients on the drugs, it’s only going to make it more difficult to get them, Ricks said.

The spending announced Friday adds to the roughly $3.7 billion Lilly has already earmarked for the site in Lebanon, Indiana — about 27 miles northwest of its Indianapolis headquarters.

Lilly’s investment comes amid escalating Congressional scrutiny of Chinese companies that manufacture ingredients for U.S. pharmaceutical companies. Expanding the Indiana site “gives us the assurance we can supply our patients in the United States with our medications,” Ricks said at the event.

The expansion is set to add 200 full-time jobs for highly skilled workers such as engineers, scientists, operating personnel and lab technicians who will be among an estimated 900 full-time employees when the facility is fully operational. There will be more than 5,000 construction jobs during the site’s development, the company said. 

“You’re talking about not just that facility, and what they’ll manufacture there, but the whole supply chain that then forms up around them,” Holcomb said. Lilly is entitled to more than $1 billion in state tax rebates and training grants tied to the facility, according to a statement from his office.

Lilly’s shares, up 39 per cent since the year began, were little changed as of 1:19 p.m. in New York.