Pfizer, the US pharmaceutical giant, has clinched a $10 billion agreement with Metsala, a developer of obesity medications. This marks the end of a competitive bidding struggle with Danish rival Novo Nordisk.
Metsala opted for Pfizer’s more cautious offer on Friday, mentioning the risks associated with Novo’s proposal, which it had initially deemed more favorable. Consequently, Novo Nordisk announced on Saturday that it was withdrawing from the competition.
Even though Metsala’s treatment is still in the developmental phase, this acquisition gives Pfizer a foothold in the lucrative obesity drug market. This development is a setback for Novo, which is attempting to recover ground against American competitor Eli Lilly.
Biotechnology bidding war with twists and turns
Pfizer seemed close to securing the deal in September, but Novo swooped in last week with an unsolicited offer, reigniting a race for valuable assets in the expanding weight-loss market. Pfizer is aiming to establish itself in combating obesity, after facing challenges in its own weight-loss drug development.
Pfizer’s offer is $86.25 per share, which is a 3.69% increase from Metsala’s closing price on Friday. This includes $65.60 in cash for each share and a conditional payment that could deliver up to $20.65 more per share.
Novo Nordisk indicated on Saturday that it wouldn’t increase its bid. The Danish company stated that it was focusing on advancing its pipeline of obesity treatments and exploring other business opportunities.
A source close to Novo remarked that the previous bid was Metsala’s best value. They expressed confidence in their obesity drug pipeline, emphasizing that this deal wasn’t critical for Novo.
“Unacceptably high legal and regulatory risks”
Metsala’s stock surged nearly 60% in value last week amid the escalating merger and acquisition dynamics, boosting its market value to approximately $8.75 billion. Initially, it appeared that Novo had the upper hand as it sought to regain its leadership in the obesity drug sector, previously lost to Eli Lilly.
In a statement, Metsala noted that Novo’s offer posed “unacceptably high legal and regulatory risks” compared to Pfizer’s proposal. The U.S. Federal Trade Commission had raised concerns regarding potential antitrust violations related to the deal.
Novo maintained that its proposal is compliant with antitrust regulations, while Pfizer expressed satisfaction with its revised agreement with Metsala and plans to finalize the merger post the shareholders’ meeting on November 13.
‘Game of Thrones’-style battle for Metsala
Analyst Courtney Breen from Bernstein suggested that the $10 billion price tag relies on optimistic forecasts about Metsala’s future success, expecting revenue could reach $11 billion by 2040—nearly double current estimates. However, there are concerns about long-term pricing strategies for GLP-1 drugs, which may impact profit margins.
Metsala’s board has recommended that shareholders accept Pfizer’s revised offer, despite the fact that the company is currently operating at a loss, with expectations that losses will continue while the drug is still being developed.
A bidding war between Pfizer and Novo escalated the price from the earlier $7.3 billion offer by Pfizer in September. John LaMattina, a former Pfizer executive, mentioned that the situation resembles Pfizer’s aggressive $90 billion takeover of Warner-Lambert in 2000 for the cholesterol drug Lipitor.
“Even though this might seem like a minor deal, it likely signifies that Pfizer views the Metsala pipeline as essential for its future,” LaMattina stated.
Industry observers have highlighted the unusually aggressive nature of the competition for Metsala. Although the company’s obesity treatment still needs to prove its efficacy, it could play a crucial role in a market projected to reach $150 billion next year.
“This feels like a Game of Thrones-like struggle,” noted Peter Korchinsky, managing partner at RA Capital, which holds a significant stake in Metsala, prior to the final bid decisions.
Metsala’s experimental obesity treatments, MET-097i and MET-233i, are anticipated to potentially generate combined peak sales of $5 billion, according to analyst David Reisinger of Leerink Partners.
