Novo Nordisk Strikes Nearly $4 Billion in 2 Deals. Here's What That Means for Investors

Novo Nordisk (NYSE:NVO) is looking to maintain its position in the weight-loss market and one-up its most important competitor, Eli Lilly (NYSE:LLY). To that end, the Denmark-based pharmaceutical giant has developed several promising anti-obesity candidates internally. However, Novo has also splurged quite a bit on licensing deals to beef up its pipeline, and two such recent deals deserve investors' attention.

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Novo dishes out the cash

On Sept. 24, Novo announced an agreement with Nanexa, a drug delivery company based in Sweden. As part of the deal, Nanexa will license its proprietary PharmaShell long-acting drug-delivery technology platform to Novo for use in up to five of its injectable drugs targeting obesity, type 2 diabetes, and other metabolic conditions.

The hope is that Novo will be able to develop medicines that can be administered monthly or quarterly, thereby significantly reducing the number of doses required compared with its current weight-loss therapies. Novo paid 615 million euros ($698.4 million) upfront for this deal, and the total could rise to 1.165 billion euros ($1.32 billion) based on milestone payments.

That was the first of two significant deals Novo recently made. Here's the second. On Sept. 29, the Denmark-based pharmaceutical leader licensed HRS-1596, an investigational obesity medicine with the potential for once-weekly oral dosing, from China-based Hengrui Pharma. Novo will pay $300 million upfront and up to $2.6 billion in total, including potential milestone payments.

Why these candidates could be important

As the weight-loss market continues to expand, it will be critical for drugmakers seeking to dominate it to provide differentiated anti-obesity options to patients. Novo is positioning itself to do just that. Consider the first of these deals. If Novo can develop a weight-loss medicine administered quarterly, it could attract many patients, even if it reports slightly lower efficacy than its famous medicine, Wegovy. Convenience counts for something. Taking four doses per year is much more convenient than taking 52.

Novo's deal for HRS-1596 is arguably even more important. Here's why. The company’s oral Wegovy hit the market this year and has, so far, been successful. But oral Wegovy is supposed to be taken every day. HRS-1596 could be taken weekly. In addition, this medicine is a dual GLP-1/GIP agonist, in the same class as Eli Lilly's market-leading Zepbound.

HRS-1596 is still in the very early stages of development, and it’s far too early to predict its safety and efficacy. But if it performs well in clinical trials, it could be a game changer for Novo. So, these deals could help the pharmaceutical giant strengthen its market position.

Is the stock attractive at current levels?

Of course, Novo already has attractive pipeline candidates in its core therapeutic area, including some that could prove highly effective. The company's zenagamtide is undergoing Phase 3 studies after posting an excellent mean weight loss of up to 24.3% in 36 weeks. Zenagamtide is being developed in both oral and subcutaneous formulations, so it could prove to be a particularly successful product, depending on the results of Phase 3 clinical trials.

Novo is also developing UBT251, a medicine that mimics the action of three gut hormones, GLP-1, GIP, and glucagon. Eli Lilly has shown how potent this approach can be with its Phase 3 results for its own triple agonist, retatrutide, which delivered excellent weight loss numbers. UBT251 has also posted very promising results in mid-stage studies conducted in China in patients with obesity and type 2 diabetes.

Novo has plenty of other candidates beyond those; it could also sign more licensing deals and perhaps even choose to diversify beyond its core therapeutic area. What does all of that tell us about the company's future?

Novo has encountered clinical setbacks in recent years, but it has hedged against that by significantly expanding its pipeline. We could see some successes and several brand new products for the company over the next five years as it rides the wave of the rapidly growing anti-obesity market.

And after dropping by almost 70% over the past two years, Novo's shares look attractive, especially for investors focused on the long game.

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends Eli Lilly and Novo Nordisk. The Motley Fool has a disclosure policy.