Shares of Septerna SEPN surged 51% on May 14 after the company entered into an exclusive global collaboration and license agreement with Danish pharma company, Novo Nordisk NVO, for developing and commercializing oral small molecule medicines for treating obesity, type 2 diabetes and other cardiometabolic diseases.

Year to date, shares of Septerna have plunged 55.7% compared with the industry’s decline of 8.4%.Zacks Investment Research

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SEPN & NVO's Deal Rationale

Both companies will jointly conduct research and development activities, as well as candidate selection. NVO will bear all research and development costs for the partnered programs, starting with the investigational new drug enabling activities. Septerna will have the right to opt into a global profit-sharing for one of the product candidates in place of future milestone and royalty payments.

Under the deal, Septerna is eligible to receive around $2.2 billion from Novo Nordisk, including an upfront payment of $200 million and near-term milestone payments. SEPN is also entitled to receive tiered royalties on global net sales if a product is commercialized as a result of the above collaboration.

The transaction is expected to be closed later in the second quarter of 2025, subject to customary closing conditions.

How Will the Deal With SEPN Benefit NVO?

Per the agreement, both SEPN and NVO plan to start four development programs for potential small molecule therapies for key G protein-coupled receptor (GPCR) targets, including GLP-1, GIP and glucagon receptors. GPCRs represent a large family of cell surface receptors that transmit signals across cell membranes.

The partnership aims to leverage Septerna’s expertise in GPCR drug discovery with Novo Nordisk’s leadership and innovation in the field of obesity and cardiometabolic diseases.

With the latest agreement with Septerna, Novo Nordisk aims to expand its presence in the highly competitive obesity treatment market. The company is rapidly developing a pipeline of oral therapies to diversify from its injectable GLP-1 products, including Wegovy and Ozempic (semaglutide).

The deal with SEPN for developing oral obesity pills should complement NVO’s obesity pipeline, as oral drugs are easier to use compared to injections, which can improve patient adherence.

Year to date, shares of Novo Nordisk have lost 25.1% compared with the industry’s decline of 5.8%.Zacks Investment Research

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Intense Competition in the Obesity Market

Competition in the obesity market is intensifying. The market is expected to expand to $100 billion by 2030, according to data from Goldman Sachs. Eli Lilly LLY and Novo Nordisk presently dominate the market.

Story Continues

Lilly’s popular tirzepatide medicines include diabetes drug Mounjaro and weight loss medicine, Zepbound.

However, to stifle increasing competition from Eli Lilly, Novo Nordisk is developing new obesity treatments to stay ahead, especially in the U.S. market. A regulatory application seeking the approval of oral semaglutide 25 mg for weight management is currently under review by the FDA. A final decision from the regulatory body is expected around the turn of the year.

Meanwhile, CVS Caremark, a major pharmacy benefit manager (“PBM”), recently announced that it would make NVO’s Wegovy its preferred GLP-1 therapy for weight loss, effective July 1. This is likely to give NVO a commercial advantage over its arch rival Lilly in the obesity market.

Several other companies like Amgen AMGN and Viking Therapeutics are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline.

Amgen has begun a broad phase III program on its dual GIPR/GLP-1 receptor agonist, MariTide, across obesity, obesity-related conditions and type II diabetes, with the first two phase III studies initiated in March.

Viking Therapeutics’ dual GIPR/GLP-1 receptor agonist, VK2735, is being developed both as oral and subcutaneous formulations for the treatment of obesity.

If successfully developed, AMGN and VKTX’s products can pose strong competition to LLY’s Mounjaro/Zepbound and NVO’s Ozempic/Wegovy in the future.

Others like Roche, Merck and AbbVie are also looking to enter the obesity space by in-licensing obesity candidates from smaller biotechs.

Zacks Rank of SEPN and NVO

Septerna and Novo Nordisk currently carry a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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