As pharmaceutical companies seek to keep up with demand for diabetes medications in an increasingly overweight world, Danish drug maker Novo Nordisk said it will open new factories in North Carolina and Denmark.
Novo Nordisk plans to invest about $2 billion over the next five years in new production facilities in the Raleigh suburb of Clayton and near Copenhagen, Denmark. The company plans to create close to 700 new production and engineering jobs in Clayton, where Novo Nordisk now employs more than 700 people at a factory producing insulin products.
Clayton primarily competed for the expansion against Novo Nordisk locations in Massachusetts and New Jersey, where the company has its U.S. headquarters, said Jesper Høiland, president of U.S. operations. The decision came down to the strong partnership Novo Nordisk has formed with state and local leaders, he said, and the quality and stability of the local workforce.
"For us, the future hub has been decided to be here in Clayton," Høiland said at a news conference at Novo Nordisk's existing facility.
While U.S. Food and Drug Administration approval to sell that drug isn't guaranteed, announcing Clayton as a related production site could help the company enlist political support to lean on the agency if needed in the future, said Steve Brozak, who follows the pharmaceutical industry as president of WBB Securities. "This is sort of like a belt-and-suspenders approach for Novo Nordisk," he said.
Jobs at the North Carolina plant would have average annual salaries of more than $68,000. Novo Nordisk must meet hiring and investment targets to collect all the promised state tax breaks. More than half of Novo Nordisk's sales and growth is coming from the United States, and that's only projected to increase as more Americans learn they have diabetes and need to treat it, Hoiland said. "This is our commitment for the long term," Hoiland said.
With so much revenue generated in the U.S., it made sense to avoid currency fluctuations and expand production in the country too, Hoiland said. The company's two-decade experience in North Carolina and the government incentives offered closed the decision, he said.
About 95 percent of diabetics have Type 2 diabetes, linked to obesity and too little exercise, which has become increasingly common. Nearly 30 million American adults and children have diabetes. About 86 million more are at risk of developing diabetes unless they take major, continuing steps to prevent the disease.
Novo Nordisk also plans to open a new production facility in Måløv, Denmark for tableting and packaging of oral semaglutide and future oral products. The investment in Måløv will create an estimated 100 new jobs, according to the company.
The final design and cost of the new production facilities will be presented for approval by the company's board of directors in 2016. The facilities are expected to be operational during 2020.