Roche agreed to buy 89bio on Thursday, speculating that a drug the biotechnology company is creating would provide a novel treatment for a prevalent liver ailment.
The Swiss pharmaceutical behemoth will purchase 89bio for $14.50 per share, which is 79% more than the closing price on Wednesday. If 89bio’s leading medication, pegozafermin, is approved and finally reaches specific yearly sales goals, Roche may be able to add up to an additional $6 per share through so-called contingent value rights.
89bio is valued at $2.4 billion under the transaction, but if Roche makes those extra payments, that amount would rise to $3.5 billion.
The purchase places Roche in a competitive position to create a novel medication for patients suffering from metabolic dysfunction-associated steatohepatitis, or MASH, a disorder marked by hepatic fat accumulation that results in increasing inflammation and scarring.
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Growing Impact of MASH and Industry Competition
The illness has emerged as one of the main reasons for liver transplants in recent years.
Millions of Americans are thought to be impacted by MASH, which has made it a prominent target for pharmaceutical companies throughout the years. But before the first medication, Rezdiffra, a medication from Madrigal Pharmaceuticals, was licensed last year, several promising initiatives failed or were turned down by regulators.
Rezdiffa’s quick sales have provided some answers on the demand for MASH medications. Wall Street analysts saw Novo Nordisk’s Wegovy’s approval for MASH last month as evidence that the FDA is still willing to issue “accelerated” clearances for the upcoming medications.
Companies like 89bio, which has a different kind of MASH medication in late-stage testing, have gained attention as a result of those characteristics. Pegozafermin, a form of the hormone “FGF21,” is intended to reduce inflammation and liver fat while also perhaps reversing the harmful accumulation of scar tissue that can occur in MASH patients.
Competitive Landscape and Clinical Trial Updates
Following an acquisition in May, both GSK and Akero Therapeutics have a comparable medication in advanced testing.
The results of the study have proven inconsistent. Drugs from Akero and 89bio have demonstrated the ability to repair liver scarring, whereas Novo halted development of an FGF21 medicine in August due to unsatisfactory outcomes.
Since then, some analysts have come out in support of the corporations. In August, Thomas Smith of Leerink Partners argued that Novo’s choice demonstrated that “not all FGF21 analogs are created equal” and that it demonstrated “positive differentiation” for other medications, including 89bio’s.
Roche is betting on that result. Patients with cirrhosis or moderate-to-severe fibrosis are presently enrolled in two Phase 3 trials for pegozafermin. Results are anticipated for 2027 and 2028.
Market Potential and Analyst Outlook
The business stated that pegozafermin has a “distinct mechanism of action” and can be used in conjunction with the incretin medications that Roche is developing to treat obesity.
Thomas Schinecker, CEO of Roche, stated in a statement that the medication “may potentially offer best-in-disease efficiency for all moderate to serious MASH patients.”
Although “market utilization potential is still TBD,” Brian Abrahams, an analyst at RBC Capital Markets, described 89bio’s medication as “a promising asset that has a fair shot at approvals” in MASH.
According to Abrahams, Pegozafermin’s peak yearly sales would be $2.1 billion, falling short of the $3 billion and $4 billion annual projections that would result in further acquisition payouts to shareholders.
