Novo Nordisk and Eli Lilly hoover up smaller obesity drug groups

Novo Nordisk and Eli Lilly have broken records for deals for weight-loss drugs this year, buying a series of biotechs in a bid to ensure that their dominance in the fast-growing market lasts for years.

The pair have committed to spend up to $3.5bn this year on companies developing potential obesity medication, bolstering their pipelines in a field that investors are racing to gain exposure to.

According to Dealogic, the outlay by Novo Nordisk and Eli Lilly compares to a total of $305mn that the entire pharmaceutical industry spent on acquisitions and partnerships in the field in the previous ten years.

The total excludes the three deals since 2013 that did not disclose a price but they are unlikely to have been high. Until this year, the biggest obesity deal was worth up to $185mn, when Japan’s Takeda Pharmaceuticals sold the US rights to the weight loss drug Contrave to California-based Orexigen Therapeutics in 2016.

But the market has been transformed over the past 12 months. Sales of Novo Nordisk’s Wegovy, its obesity drug, and Ozempic, its diabetes treatment, have helped turn the Danish company into Europe’s largest by market capitalisation.

Indianapolis-based Eli Lilly, meanwhile, has become the world’s largest pharmaceutical company on the back of sales of its drug Mounjaro for diabetes and strong trial results for its use in weight loss. The company is also developing a potential Alzheimer’s drug.

Emily Field, an analyst at Barclays, said the success of Novo Nordisk’s Wegovy and, in particular, a recent trial result that showed the drug significantly cut the risk of a serious cardiac event, had shown that “this market is real, it’s clinically validated and it’s only going to get bigger”. 

“The market leaders want to make sure they have all their bases covered,” she said, referring to the biotechs that Eli Lilly and Novo Nordisk have acquired this year. 

Eli Lilly’s biggest obesity deal in 2023 came in July, when it acquired Versanis Bio for up to $1.9bn, including an upfront amount and further payments if certain targets were met. The Boston-based biotech is running trials for its lead drug, Bimagrumab, on its own and in combination with semaglutide, the active ingredient in Novo Nordisk’s weight-loss drug. 

A month later, Novo Nordisk struck two deals. It bought Montreal-based Inversago Pharma for up to $1.1bn, despite it having just 22 employees. Inversago is working on a pill that tries to block a receptor that regulates appetite and metabolism and could be used for the treatment of obesity, diabetes and obesity-related complications.  

The Danish group also bought Embark Biotech for up to $500mn, adding potential drugs in obesity and type 2 diabetes. Embark Biotech was spun out from the Novo Nordisk Foundation’s centre for basic metabolic research at the University of Copenhagen in 2017. 

Last week, the Danish drugmaker also entered a partnership with GE Healthcare to develop new ways of tackling obesity and diabetes using ultrasound technology. 

Martin Holst Lange, head of development at Novo Nordisk, said the potential of the ultrasound technology was “compelling”. “Significant unmet needs remain in these diseases in spite of recent advances in care,” he said. 

Other big drugmakers were likely to be examining potential deals to secure obesity medicines, said Field of Barclays, especially those that sold diabetes drugs, such as AstraZeneca and Sanofi, or cardio-metabolic treatments, such as Novartis. Pfizer and Amgen are already investing in their own obesity pipelines, she added. 

But one healthcare banker said other pharmaceutical companies may hesitate to do acquisitions because many no longer have the large sales forces needed to sell to primary care physicians. 

“The obesity field is going to be dominated by those two guys [Novo Nordisk and Eli Lilly] and who wants to go up against them?” he said. “It would be super hard.”