Roche: fat fighter drugs buy must precede trial wins

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In a race, any place but first can feel like coming last. That is not the case for pharmaceutical companies. Novo Nordisk and Eli Lilly are already striding ahead with anti-obesity treatments. But prizes are still on offer for also-rans, especially if they can compete on price. Barclays estimates the market could be worth $100bn within a decade,

Switzerland’s Roche has just boosted its chances of being a contender. It is acquiring US-based obesity drugs developer Carmot Therapeutics for up to $3.1bn. It is the second bolt-on acquisition by Roche’s new chief executive Thomas Schinecker in less than two months.

Schinecker needs to soothe investor jitters over Roche’s pipeline. The group had several big disappointments in 2022. These included trial failures by its Alzheimer’s drug, gantenerumab.

The Carmot deal will give Roche access to three clinical stage assets based on GLP-1 treatments for obesity. These drugs are similar to Eli Lilly’s much-discussed Mounjaro. Others are joining the obesity drug race: AstraZeneca in November struck a $2bn licensing agreement with China’s Eccogene.

Two of the Carmot treatments are injectable, including snappily named lead asset CT-388. The other is in pill form — the Holy Grail of anti-obesity medicines. But only data for one out of three trial stages is available for CT-388. That would explain the modest 2.5 per cent rise in Roche’s share price on Monday. Year-to-date, the stock is still down more than 15 per cent.

Roche trades on a forward price/earnings ratio of 12.4 times, behind its five-year average of just over 15 times.

Schinecker has been trying hard to persuade investors Roche has one of the youngest drug portfolios in the business. It has 98 pipeline assets in various phases, well ahead of a sector average of 70. Its problem is that phase 3 trial success rates have fallen below sector averages.

Schinecker will have to better that hit rate if he is to persuade investors that Roche’s losing streak is behind it.

Lex is the FT’s concise daily investment column. Expert writers in four global financial centres provide informed, timely opinions on capital trends and big businesses. Click to explore