Eli Lilly: Versanis Acquisition Nets New Mid-Stage Weight Loss Drug at a Reasonable Price

Eli Lilly’s LLY announced acquisition of the private cardiometabolic firm Versanis Bio for up to $1.925 billion doesn’t have a major impact on our Lilly fair value estimate or wide moat rating. However, the acquisition gives Lilly another potential weight-loss treatment with phase 2 drug bimagrumab.

Unlike Lilly’s other weight-loss drugs that target the GLP-1 pathway (solely or in combination with other pathways), bimagrumab provides a different mechanism of action by blocking activin and myostatin signaling. Based on earlier studies showing the drug caused over a 20% reduction in fat mass, we believe the unique mechanism of action could be synergistic with Lilly’s GLP-1 drugs. A phase 2b study looking at bimagrumab as monotherapy and in combination with Novo’s semaglutide should complete in 2025, potentially supporting phase 3 studies. We would expect the phase 3 studies to utilize Lilly’s GLP-1 drugs rather than semaglutide. Also, we see this acquisition as partly defensive, ensuring that Novo doesn’t gain access to a potential follow-on combination drug to compete with Lilly.

Despite all the recent success in treating weight loss with GLP-1 drugs, we still retain a high level of skepticism in new mechanisms of action to treat obesity, given the high failure rates in weight-loss drug development over the past three decades. Nevertheless, if bimagrumab is successful in late-stage development, the drug holds the potential to extend Lilly’s growing and powerful weight-loss drug portfolio.