Roche strikes $3.1 billion deal to buy obesity-drug maker Carmot Therapeutics in race to rival Novo Nordisk’s Ozempic

Shares in Roche
ROG,
+2.40%
increased 3% on Monday. The Swiss drugmaker has lost 31% of its value over the past 12 months.

The deal will see Roche, which was first founded in 1896, pay Carmot’s equity holders $2.7 billion upfront, and up to $400 million later, depending on the achievement of certain milestones. All 70 of Carmot’s employees will join Roche’s pharmaceutical division. 

Roche’s acquisition comes as the world’s top drugmakers are increasingly seeking to cash in on the rapidly-expanding market for obesity drugs, which has seen Ozempic-maker Novo Nordisk become the most valuable company in Europe. 

“The obesity epidemic is a worldwide crisis and only continues to worsen. By 2035 it is estimated that nearly half the world’s population will be overweight or obese,” Carmot’s chairman Tim Kutzkey said.

Novo Nordisk’s successes have seen pharmaceutical companies pile into the market, in a race that has seen both Pfizer
PFE,
-5.12%
and AstraZeneca
AZN,
+0.18%
seek to develop GLP-1 agonists that could rival the Danish firm’s blockbuster medicines, Ozempic and Wegovy. 

In a note, Barclays’ analysts led by Emily Field said growth in the market for obesity drugs, which is set to be worth $100 billion a year by 2030, means “even late entrants could have significant sales.”

As of now, the only companies with GLP-1 agonists that have been approved for obesity in either the U.S. or European Union are Novo Nordisk
NOVO.B,
-0.42%
and Eli Lilly
LLY,
-1.18%,
whose injectable weight loss drug Zepbound was approved by the Food and Drug Administration in November 

In their efforts to capitalize on the multibillion-dollar market for GLP-1 drugs, pharma giants are now seeking to develop orally administered alternatives to the injectable drugs that are currently the only GLP-1 drugs available to treat obesity. 

Market leaders Eli Lilly and Novo Nordisk are both currently seeking to develop their own orally administered obesity drugs, with the Danish firm aiming to file for U.S. and E.U. approval of its medicine this year.  

Pfizer shares tumbled on Friday after saying it was forced to discontinue trials of its own twice-daily weight loss pill, Danuglipron, after more than half of patients dropped out of trials due to side effects including nausea and vomiting. 

Pfizer said it would now focus on a once-daily formulation of Danuglipron, which it hopes will have fewer side-effects. 

In November, AstraZeneca struck a $2 billion deal with Eccogene through which the Anglo-Swedish company gained an exclusive license to market the Shanghai biotech company’s experimental once-daily weight-loss pill that recently completed Phase 1 trials. 

Jeffries analysts led by Peter Welford said Roche’s acquisition sits in line with the Swiss firm’s push to bolster its pipeline as they speculated the new GLP-1 drugs could be marketed alongside muscle-preserving drugs, including GYM329.

“Phase I data for Carmot’s lead asset are competitive, albeit early,
however we believe potential to combine with Roche’s muscle-preserving
candidates was likely a key draw of the acquisition,” Jeffries analysts said.

The rise of GLP-1 agonist weight loss drugs has also impacted wider markets, with Walmart
WMT,
-0.87%
CEO John Furner telling Bloomberg in October that appetite suppressing medicines have caused customers to buy less food.

Roche’s acquisition comes after Carmot filed paperwork in November with the U.S. Securities and Exchange Commission to launch an initial public offering on the NASDAQ under the ticker symbol CRMO.