What happened
Shares of Eli Lilly (LLY 1.19%) were up by 3.13% on heavy volume as of 11:32 a.m. ET Friday morning. The drugmaker's stock is rising today in response to a buyout agreement with privately owned Versanis Bio.
The acquisition will expand Lilly's portfolio of metabolic disease treatments with the addition of bimagrumab, a monoclonal antibody currently in phase 2 clinical trials for weight loss. Under the terms of the agreement, Lilly will pay an undisclosed upfront amount to Versanis Bio and may make additional payments based on the achievement of certain development and commercial milestones. The total value of the deal could reach up to $1.93 billion, according to Lilly.
So what
Bimagrumab is a novel anti-obesity agent that targets the activin type II A and B receptors. Unlike the GLP-1 receptor agonists developed by Lilly and Novo Nordisk, bimagrumab has a unique mode of action that may offer additional benefits such as promoting fat loss while increasing muscle mass in obese patients.
Bimagrumab is currently being evaluated as both a monotherapy and in combination with Novo Nordisk's semaglutide, a potent GLP-1 receptor agonist, to assess whether the dual therapy can reduce fat mass while preserving or increasing muscle mass. This potential best-in-class therapy could give Lilly a competitive edge over other players in the obesity market, such as Novo Nordisk, Amgen, and Pfizer.
Now what
Is Lilly's stock a buy on this news? The obesity market is expected to grow significantly in the coming years, with some analysts projecting revenue of more than $44 billion by 2030. The drugmaker's pursuit of additional assets in this large and growing market could be a boon for shareholders. As a result, its shares may be worth buying in the wake of this intriguing acquisition.
