Novo Nordisk (NVO) Up on $1.1B Research Deals With 2 Biotechs
Novo Nordisk A/S NVO announced that it has entered into separate research collaborations with Omega Therapeutics OMGA and a privately-held biotech company, Cellarity, to develop novel treatment approaches for cardiometabolic diseases.
The collaboration deal with Omega Therapeutics will leverage the company’s proprietary platform technology to develop an epigenomic controller designed to enhance metabolic activity as part of a potential new treatment approach for obesity management.
On the other hand, the deal with Cellarity is twofold. The first part of the deal aims to discover novel biological drivers of metabolic dysfunction-associated steatohepatitis (MASH), which will then leverage Cellarity’s proprietary platform to develop a small molecule therapy against this disease.
These two deals, signed with Omega Therapeutics and Cellarity, are the first two programs signed under the framework collaboration between Flagship Pioneering’s Pioneering Medicines division and Novo Nordisk’s research and development wing. The collaboration with Flagship seeks to leverage its bioplatform companies to develop novel therapies for cardiometabolic indications.
Per the terms of the respective agreements, Novo Nordisk is liable to reimburse the research and development costs incurred by Omega Therapeutics and Cellarity. Additionally, NVO is liable to pay up to $532 million in upfront, development and commercial milestone payments, along with tiered royalties on annual net sales of a licensed product.
Such royalty payments received from NVO will be shared between the respective companies and Flagship’s Pioneering Medicines. This brings the combined deal value to a whopping $1.1 billion with the two biotechs.
Pioneering Medicines is a strategic initiative by Flagship Pioneering that is dedicated to discovering and developing a broad portfolio of life-changing treatments by leveraging and expanding the use of Flagship’s innovations.
Novo Nordisk’s stock gained about 4% in the last trading session as the investors were impressed by these encouraging deals. Over the past year, shares of NVO have rallied 55.3% compared with the industry’s 9% growth.
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The deal with Omega Therapeutics is particularly interesting as the obesity drugs have remained in the spotlight for most of 2023. While most existing therapeutic interventions for weight management have focused on appetite regulation, Omega’s platform is looking to develop an epigenomic controller designed to enhance thermogenesis to increase metabolic activity. The company plans to achieve that by harnessing the human body’s innate mechanisms to control cellular identity and gene expression.
Thermogenesis is a natural metabolic function responsible for producing heat within tissues to raise body temperature in humans and animals.
Novo Nordisk already markets Wegovy (semaglutide 2.4 mg) for chronic weight management in adults with obesity or overweight. The company’s vast knowledge and expertise in this market will give Omega Therapeutics a significant edge over the competitors to develop a candidate based on this new therapeutic approach. Shares of Omega Therapeutics skyrocketed about 94.7% in the last trading session as the investors cheered the research collaboration.
Per the press release, there are more than 800 million adults living with obesity globally.
Cellarity uses its proprietary AI models to design new therapeutic candidates with novel mechanisms of action, which were previously deemed inaccessible with traditional methods of drug discovery. Novo Nordisk had initially collaborated with Cellarity in September 2022, tasking the latter to identify novel cell behaviors implicated in MASH disease progression.
The recently announced collaboration will build upon the initial work and looks to further leverage Cellarity’s platform to develop a small molecule therapy.
MASH is a chronic and progressive liver disease that often leads to liver failure or requires transplantation. With no currently approved treatments, there is a high unmet medical need for therapies. MASH patients are also at increased risk of developing type II diabetes and cardiovascular disease.
We would like to remind the investors that Novo Nordisk initially signed a collaboration agreement with Flagship Pioneering in May 2022 to create a portfolio of novel research programs to develop transformational medicines.
Novo Nordisk A/S Price and Consensus
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Biotech firms have been competing fiercely throughout 2023 to enter the obesity market due to the huge untapped market opportunity that it represents amid increasing demand. Eli Lilly LLY and AstraZeneca AZN are two such large-cap drug makers currently operating in the obesity market.
In November 2023, Lilly received FDA approval for tirzepatide, under the brand name Zepbound, for chronic weight management in adults with obesity or overweight. LLY’s tirzepatide was approved by the FDA in 2022 under the trade name Mounjaro, a dual GIP and GLP-1 receptor agonist, to treat adults with type 2 diabetes mellitus.
Since its launch, Mounjaro has shown an impressive initial uptake. Approval of the obesity indication is expected to help Lilly rake in billions of dollars from tirzepatide sales.
Also in November 2023, AstraZeneca announced that it has entered into an exclusive deal with Chinese private biotech Eccogene to develop the latter’s oral drug, ECC5004, for treating obesity, type-II diabetes and other cardiometabolic conditions. AZN plans to develop ECC5004 both as monotherapy and combination therapies.
With the deal, AstraZeneca will get exclusive global development and commercialization rights to Eccogene in all territories except China. In China, Eccogene and AstraZeneca have joint rights.
Zacks Rank
Novo Nordisk currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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