NEW YORK, Sept 2 (Reuters) - Some Chinese companies now

racing to make generic versions of Novo Nordisk's

Wegovy also supplied ingredients for more than a billion

makeshift doses of weight-loss drugs sold online in the U.S.

over the past two years, according to three sources and a

Reuters review of shipping and public records.

Cheap copies of Wegovy and Eli Lilly's ( LLY ) Zepbound are

on the retreat in the U.S. as regulators restrict their sale,

slowing shipments from Chinese suppliers of the raw ingredients

that allowed for explosive growth of the medicines.

Robert Califf, who had two stints leading the U.S. Food and

Drug Administration, said never before had a new drug become so

wildly popular that the manufacturer simply couldn't keep up.

The shortage opened the door for compounding pharmacies,

turbocharged by telehealth firms that flourished during the

COVID pandemic, to supply cheap copies to a huge market chasing

the promised weight loss.

The pivot to FDA-approved generics as patents expire in

various countries follows a year of soaring demand for the

branded drugs, which have been shown to help people shed as much

as 20% of their weight.

At least eight Chinese companies, including publicly traded

Jiangsu Sinopep-Allsino Biopharmaceutical and Hybio

Pharmaceutical, helped flood the U.S. with raw

semaglutide and tirzepatide, the main ingredients in Wegovy and

Zepbound, respectively, sources told Reuters. A Reuters analysis

of U.S. FDA shipping records backs that up.

Hybio and Sinopep are working to launch their own generic

semaglutides, according to one of the sources with knowledge of

the efforts and previous Reuters reporting. The source also said

Nanjing Hanxin Pharmaceutical and Fujian Genohope Biotech, two

of the companies that had supplied compounders, may launch as

well.

None of the companies responded to requests for comment.

U.S. law now restricts compounding pharmacies to producing

personalized doses for patients who need them, or formulations

not offered by the branded medicines.

The source said that for one Chinese manufacturer, supplying

ingredients for compounded weight-loss drugs had been its

biggest business. The manufacturer is now targeting markets

where Novo's main semaglutide patent is expiring next year, such

as Canada and Brazil, to sell the ingredient to generic

drugmakers, he said.

He said he knew of at least five other Chinese companies

known to supply compounding pharmacies that were similarly

refocusing on supplying semaglutide for generics.

The switch is unlikely to produce similar explosive growth.

Manufacturing semaglutide to its final, injectable form is

complex, said a lawyer for a generic drugmaker who asked for

anonymity because he was not authorized to discuss the topic.

Companies seeking to sell generics also may strike deals

with branded companies that delay their market entry.

'ONCE-IN-A-DECADE ISSUE'

Compounding of the in-demand weight-loss medicines while the

branded drugs were in short supply represented an unprecedented

opportunity.

In 2024 alone, the eight Chinese companies shipped enough

raw material into the U.S. to produce more than 1 billion

starter doses of the blockbuster medicines, according to FDA

shipping data.

Novo's estimate is even higher. It said Chinese companies

shipped enough semaglutide into the U.S. in just over six months

to make 1.5 billion starter doses of Wegovy, according to a

letter submitted to the U.S. Department of Commerce and posted

publicly.

In this year's first quarter, with company supply shortages

no longer an issue and the FDA pressing for an end to mass

compounding, Hybio, Sinopep and others were still bringing in

sizable shipments of ingredients to copy both drugs.

By the second quarter, shipments had plunged 90% from a year

earlier for semaglutide, also the main ingredient in Novo's

diabetes treatment Ozempic, and by 34% for tirzepatide used to

make Zepbound and Mounjaro copies.

The economics for Chinese companies selling semaglutide to

compounders was appealing. A month's supply of semaglutide

powder costs just 7 cents to produce, according to a 2024 report

in JAMA. Chinese ingredient makers can sell that for as much as

seven times that amount to manufacturers looking to make copies,

based on sales figures provided by the source.

U.S. compounding pharmacies were selling the injectable

drugs for an average of as low as $230 a month, more than half

off the branded prices.

The cost to Novo has been high. It missed quarterly sales

targets and shares of the Danish drugmaker have been halved this

year, contributing to the CEO's May ouster.

Records show that Sinopep, Hybio and one other company have

started shipping into the U.S. more liraglutide, the main

ingredient of an older Novo drug sold under the brand names

Victoza and Saxenda that leads to more modest weight loss.

Generic versions of liraglutide, available in the U.S. since

2024, are now featured by online telehealth sites that once

pushed semaglutide.

A second source, a wholesaler who sells obesity drug

ingredients to compounding pharmacies but who was not authorized

to speak publicly, said he had seen an uptick in liraglutide

sales.

Marta Wosinska, a senior fellow at the Brookings Institution

who has been tracking the rise of this industry, said shipments

of Chinese-made semaglutide exploded not long after the FDA

announced the shortages in 2022.

Califf said he expects companies to test the law restricting

sales, and that the FDA will set the tone for enforcement with

industry guidance. The FDA did not provide an immediate comment.

Still, Califf said, the compounding of weight-loss drugs at

enormous scale is likely a "once-in-a-decade issue."