Merck Throws Down $2 Billion on Unproven Obesity Drug - What Do They Know That We Don't?

Merck & Co. just gave everyone “Final Boss” energy as they just dropped $112 million upfront—and promised up to $1.9 billion more in milestone payments—on an experimental obesity pill from Chinese drugmaker Hansoh Pharmaceutical Group. Translation: Merck is betting big (like, bigger than my holiday eating habits) on the future of weight-loss drugs. 

(Source: Giphy) 

In short, this deal gives Merck the exclusive global rights to develop, manufacture, and sell Hansoh’s HS-10535, a preclinical oral drug that targets GLP-1 receptors—the same gut hormone mimic behind blockbuster injectables like Novo Nordisk’s Ozempic and Wegovy. But here’s the thicc and girthy part: this one’s a pill. No needles, no problems, baby. 

(Source: Bloomberg) 

Now with that said, if you think this is just about helping people shed a few pounds after they make “gluttony” their entire personality this month, think again.  The global obesity drug market is expected to balloon to $100 billion a year by the early 2030s—and Merck wants a seat at that all-you-can-eat buffet. This is definitely understandable, especially as GLP-1 drugs like Ozempic have already taken the market by storm. The problem though is that they require injections, which some people (read: most people) aren’t exactly thrilled about. The holy grail? A pill that works just as well. And Merck’s hoping Hansoh’s experimental HS-10535 could be their golden ticket.

Of course, it’s still in the preclinical stage, meaning it hasn’t even been tested on humans yet. You know, minor detail. But if the science checks out, this drug could become the next must-have accessory in the weight-loss world—because apparently, the “hot girl summer” aesthetic now has a pharmaceutical sponsor.

(Source: Giphy) 

But, but, but… why TF China though? Good question. Simply put, China is becoming a major player in GLP-1 innovation. Just last year, AstraZeneca ponied up $185 million upfront (and much more in potential milestones) for rights to another Chinese GLP-1 drug from Eccogene. And let’s not forget the $400 million U.S. investors threw at Kailera Therapeutics, which is built around GLP-1 programs from Jiangsu Hengrui Pharmaceuticals.

Meaning, Hansoh gets to leverage Merck’s global reach, and in return, Merck gets a shot at cracking the obesity market with a drug that might actually work and be convenient. Oh, and Hansoh also gets royalties if this thing ever makes it to market. Win-win.

(Source: Giphy) 

For this reason, this deal isn’t about chasing Ozempic for Merk, it’s about diversifying the future. CEO Rob Davis has been clear about wanting to build out a pipeline of second- and third-generation treatments for obesity, diabetes, and related diseases. And Dr. Dean Li, president of Merck Research Laboratories, is hyping HS-10535 as a potential game-changer, saying it could provide “additional cardiometabolic benefits beyond weight reduction.” Translation: they’re thinking bigger than just helping you fit into your old jeans. This is about tackling metabolic diseases on a broader scale.

That said, Merck’s also got some catching up to do. Companies like Roche and Pfizer are already testing their own GLP-1 pills, and Novo Nordisk remains the undisputed heavyweight champ of the space. So, while Merck is making moves, they’re still playing catch-up in a market that’s heating up faster than the microwaved burrito I had for dinner last night. 

(Source: Yahoo Finance) 

On the other hand, to fund this little science experiment, Merck will take a $112 million pre-tax charge in its Q4 results. Not exactly pocket change, but when you’re playing in a market that could hit $100 billion annually, it’s the cost of doing business. Meanwhile, Hansoh has the option to co-promote or solely commercialize the drug in China, depending on how things shake out. For now, though, Merck is holding the reins globally.

In the end, it’s no doubt that Merck’s $2 billion play for Hansoh’s experimental obesity pill is bold, but still, it’s a friggin’ gamble, friends. The drug hasn’t even made it to human trials yet, and the competition in the GLP-1 space is fierce. But again, if the  science holds up and Merck’s bet pays off, they’ll have a shot at cashing in on one of the most lucrative trends in modern medicine. For now, though, they’re just the latest player to ante up in the obesity drug arms race.

(Source: Outsourcing Pharma) 

Call it what you want—strategic pivot, high-stakes gamble, or just another Monday in Big Pharma—but one thing’s clear: Merck is going all-in on the future of weight-loss meds. And if it works, they’ll be laughing all the way to the bank. If not? Well, sucks to suck I guess.

In the meantime, filter this through a brain-cell, place your bets accordingly, and be smart. As always stay safe and stay frosty, friends! Until next time…

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Stocks.News holds positions in Merck & Co. as mentioned in the article.