AstraZeneca Enters Obesity Market

AstraZeneca enters the hottest part of the pharmaceutical market through an agreement to market obesity and diabetes drugs

Johanna Englundh 9 November, 2023 | 10:42AM
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AstraZeneca (AZN), the Anglo-Swedish pharmaceutical giant, has entered an exclusive agreement with Eccogene, licensing the latter's treatments for conditions such as type-2 diabetes and obesity. Astra's shares rose 3% on Thursday, making the company one of the biggest risers on the FTSE 100.

Eccogene’s product ECC5004 is a "peptide 1 receptor" for the treatment of obesity and diabetes and, unlike current anti-obesity preparations, it is taken orally instead of injected. 

In AstraZeneca’s latest earnings report, Pascal Soriot, CEO, says: “I am excited about the acceleration of our cardiometabolic and obesity pipeline with today’s licensing agreement for ECC5004, a potential best-in-class, oral GLP-1RA11. This molecule could offer an important advance, as both a monotherapy and in combinations, for the estimated one billion people living with cardiometabolic diseases such as type-2 diabetes and obesity.”

Eccogene will receive an initial upfront payment of $185 million (£150 million) and up to an additional $1.83 billion in future clinical, regulatory, and commercial milestones and tiered royalties. AstraZeneca is granted exclusive global rights for the development and commercialisation of ECC5004 for any indication in all territories except China, where Eccogene has the right to co-develop and co-commercialise alongside AstraZeneca.  

Competitors Novo Nordisk (NOVO B) and Eli Lilly (LLY) have seen their share prices surge on the back of the rising demand for their obesity drugs Ozempic and Wegovy.  

Demand for GLP-1 therapies for diabetes has already created an estimated $20 billion global market, after years of double-digit demand growth as doctors and patients become more comfortable with the long-term safety of these drugs and as benefits beyond blood sugar control become more apparent with newer therapies. This is according to a sector report from Morningstar’s analysts earlier this year.  

AstraZeneca revealed this new agreement in its latest earnings report, in which the company raised its full-year guidance for core earnings per share (EPS) and total revenue excluding Covid-19 medicines, helped by strong demand for its cancer drugs. This was despite a lower third-quarter profit that missed forecasts after booking a tax charge compared with a credit for the comparable period. 

The pharmaceutical giant now expects core earnings per share to increase by a low double-digit percentage compared with previous guidance of a high single-digit to low double-digit percentage increase. 

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Johanna Englundh  Johanna Englundh is an editor for Morningstar in Sweden 

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