To foray into the lucrative obesity market, Merck MRK announced that it is in-licensing global rights to an investigational oral GLP-1 receptor agonist, HS-10535, from Chinese biotech Hansoh Pharma.

For the exclusive global rights to develop, manufacture and commercialize this pre-clinical candidate, Merck will make an upfront payment of $112 million to Hansoh Pharma, with the latter also being entitled to receive up to $1.9 billion in milestone payments and royalties on sales. Hansoh has an option to co-promote or solely commercialize HS-10535 in China.

For the deal, Merck will record a pre-tax charge of $112 million or 4 cents per share in the fourth quarter of 2024.

The GLP-1 segment is a very important class of drugs for multiple cardiometabolic diseases like diabetes and obesity and is gaining significant popularity.  GLP-1 drugs work by mimicking the hormone GLP-1, resulting in weight loss, lowering hemoglobin A1c (HbA1c) and reducing cardiovascular risks.

Eli Lilly LLY and Novo Nordisk NVO are presently dominating the obesity market with their weekly GLP-1 injections, Zepbound and Wegovy, respectively. Lilly and Novo Nordisk also market their diabetes drugs, Mounjaro and Ozempic, off-label for weight loss.

Oral pills like HS-10535, if approved as weight loss drugs, can significantly improve patients’ convenience and potentially their costs.

Merck shares have declined 9.8% this year so far compared to the industry’s growth of 6.5%.

Image Source: Zacks Investment Research

Obesity Market is Heating Up

Obesity has become a global health problem as it can cause other diseases like heart disease, diabetes and stroke, leading to an exponential increase in demand for obesity medicines. Also, social media has somewhat hyped the benefits of these medications.

The obesity market is expected to expand to $100 billion by 2030, according to data from Goldman Sachs. All large drugmakers are looking to strengthen their presence in this market by expanding their existing obesity pipeline or acquiring smaller biotechs whose pipeline has novel obesity candidates.

Lilly is investing broadly in obesity and has 11 new molecules currently in clinical development. These include two late-stage candidates, orforglipron, an oral GLP-1 small molecule and retatrutide, a GGG tri-agonist and some mid-stage candidates, bimagrumab, eloralintide and mazdutide.

Novo Nordisk is also evaluating a once-daily oral formulation of Wegovy in late-stage studies.

Amgen and Viking Therapeutics VKTX are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline.

Last month, Amgen announced 52-week top-line data from a phase II study on MariTide, its GLP-1 therapy for obesity. The data showed that MariTide led to approximately 20% average weight loss over 52 weeks without reaching a weight loss plateau.

Viking is developing its GIP/GLP-1 agonist VK2735 as a subcutaneous (SC) injection and an oral pill to treat obesity in a phase II and phase I study. VK2735 has demonstrated superior weight reduction capabilities in both clinical studies. VKTX shares dropped 18% on Wednesday in response to Merck’s obesity deal announcement. Merck was rumored to be the most likely acquirer of Viking.

Pfizer is developing danuglipron, an oral GLP-1R agonist for obesity, in a phase I study. Roche acquired Carmot Therapeutics in January and gained clinical-stage assets with best-in-class potential in obesity (CT-388 and CT-996). AstraZeneca also bought rights to AZD5004, a small-molecule oral GLP-1 receptor, from a Chinese biotech in November 2023.

Merck has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Merck & Co., Inc. Price and Consensus

Merck & Co., Inc. price-consensus-chart | Merck & Co., Inc. Quote

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Novo Nordisk A/S (NVO) : Free Stock Analysis Report

Merck & Co., Inc. (MRK) : Free Stock Analysis Report

Eli Lilly and Company (LLY) : Free Stock Analysis Report

Viking Therapeutics, Inc. (VKTX) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research