Novo's Second Obesity Deal: Lexicon Partnership Worth Up to $1B

Novo Nordisk has taken a significant step in advancing its portfolio of next-generation obesity treatments by securing a licensing agreement with Lexicon Pharmaceuticals, a Texas-based biotechnology company. This collaboration grants Novo Nordisk global rights to Lexicon's oral small molecule drug, LX9851, which is designed to enhance feelings of fullness and delay the emptying of the stomach. Lexicon will receive $75 million in upfront and immediate payments, with the potential for the deal to reach a total value of up to $1 billion through further development and sales milestones.

This strategic move by Novo Nordisk follows closely on the heels of another substantial investment, where the company agreed to pay $200 million upfront, with a potential total of up to $2 billion, for a triple-G injectable from United Laboratories, a China-based firm. These deals reflect Novo Nordisk's commitment to expanding its innovative treatments in the obesity and cardiometabolic sectors, especially as its flagship drug, semaglutide, approaches the end of its patent protection in the United States by the early 2030s.

Lexicon’s LX9851 targets the enzyme Acyl-CoA Synthetase 5 (ACSL5), which plays a role in fat accumulation and energy regulation within the body. This is a novel focus area for Novo Nordisk, complementing existing initiatives aimed at sustaining its long-term impact in obesity treatment. The agreement with Lexicon is part of Novo Nordisk's broader strategy to reinforce its position in this evolving field, particularly as its semaglutide products are included in the US government’s Medicare drug price negotiations.

Despite Novo Nordisk's success and prominence in the pharmaceutical sector, its stock has experienced a challenging period, facing its worst performance month since 2002. Investor sentiment, while generally positive about the company's prospects, has highlighted the competitive landscape where various companies are eager to introduce innovative treatments for obesity, including those targeting GLP-1 and amylin pathways.

Lexicon CEO Mike Exton expressed optimism about the potential impact of LX9851, noting its distinct mechanism as a first-in-class treatment. He suggested that LX9851 could serve as a supplementary option to existing obesity medications or stand alone as a monotherapy in what he labeled the "obesity 2.0 treatment paradigm." Exton, who joined Lexicon last summer after his tenure at Novartis, views the partnership with Novo Nordisk as a significant revitalization for Lexicon.

Lexicon has faced its own set of challenges, including setbacks in a mid-stage trial for diabetic pain, necessitating multiple rounds of layoffs following the repeated inability to secure FDA approval for its heart failure drug, sotagliflozin, in type 1 diabetes. Despite these hurdles, Lexicon remains committed to advancing its pipeline, with plans to initiate human trials for obesity later this year. LX9851 also holds potential for treating metabolic dysfunction-associated steatohepatitis (MASH), previously known as NASH.

Novo Nordisk is also pursuing approval for semaglutide in treating MASH, with promising Phase 3 results reported in November. Although Novo Nordisk has yet to disclose the timeline for clinical trials involving LX9851, the collaboration with Lexicon signifies a strategic effort to broaden its therapeutic offerings in the obesity domain and address related metabolic disorders.