Roche on Monday agreed to acquire biotechnology company Carmot Therapeutics in a deal that bulks up the Swiss pharmaceutical giant’s pipeline with a group of weight loss drugs in early clinical testing.
Roche will pay $2.7 billion upfront for the Berkeley, California-based Carmot. Roche could owe as much as $400 million more in future payments to Carmot shareholders, among them The Column Group and RA Capital, if certain milestones are met. The companies expect the acquisition to close next year.
The deal hands Roche a trio of drugs in human testing for obesity, an area of pharmaceutical research that has been catalyzed by the success of weight loss medicines like Wegovy and Zepbound. Their progress has fueled a gold rush among large drugmakers, a number of which are either advancing in-house medicines or inking deals to acquire new prospects.
Best known for its cancer drugs and diagnostics, Roche is now solidly among them. The Swiss company hasn’t had the type of medicines, called incretins, that have been most sought after in this current obesity drug boom. The acquisition of Carmot will fill that gap, adding a trio of drugs in early testing, including two that are either in Phase 2 testing or ready for a mid-stage trial.
The two Carmot drugs in Phase 2 trials act on two insulin-boosting hormones called GLP-1 and GIP, similar to Zepbound. One is administered once weekly through a subcutaneous injection and in development for people with or without Type 2 diabetes. Data from a small trial, presented at a medical meeting this year, were “competitive, albeit early,” wrote Jefferies analyst Peter Welford, in a note to investors on Monday.
Carmot also has a daily treatment for Type 1 diabetics in mid-stage testing and an oral treatment in Phase 1.
Roche claims all three could be “best in class.” The Swiss company also noted their potential for use in tandem with muscle-preserving drugs in its pipeline, as well as possible other uses treating eye or brain diseases.
Still, Carmot’s drugs are behind next-generation treatments from Eli Lilly and Novo Nordisk, as well as rivals from other biotech companies. Both Lilly and Novo have acquired obesity drug startups to stay ahead in the field, too.
Roche management “foresees a fragmented obesity market, with muscle strength, not just lean mass preservation, as a key opportunity,” Jefferies analyst Welford wrote.
“The broad Carmot portfolio offers different routes of administration and opportunities to develop combination therapies that treat obesity and potentially other indications,” said Roche Chief Medical Officer Levi Garraway, in a statement.
The acquisition allows Carmot to sidestep the uncertainty biotechs currently face in the public markets. Carmot had outlined plans for an initial public offering last month. But it would’ve had to test what’s been a prolonged downturn in new stock offerings for drugmakers. There have only been 21 biotech IPOs in 2023, similar to last year’s pace and well below the record numbers of a few years ago, according to BioPharma Dive data. Many publicly traded companies are struggling, too, as more than 130 companies this year have turned to layoffs to save cash.
Carmot had raised about $371 million from private investors prior to its offering, according to its IPO filing. The Column Group is by far its largest investor, holding a roughly 40% stake in the company.