Merck & Co Inc. (NYSE: MRK), is the focus of attention this morning, after announcing a deal worth $2.0 billion with Hansoh Pharma.
The agreement grants it the rights to HS10535, an experimental weight loss pill (oral), developed by a Chinese drugmaker.
According to a Wednesday press release, Merck will pay Hansoh an upfront payment of $112m and the remainder in milestone payments and royalty payments.
Merck’s stock is currently down about 25% from its high of late June.
What Merck’s announcement means for Eli Lilly
Merck has been a pharmaceutical giant since 1891, and is known for its medical innovations.
Even though its entry into the obesity drug industry may not be significant to space leaders like Eli Lilly or Novo Nordisk, it is still a good thing for them.
Merck is still in the early stages when it comes to experimenting with weight loss treatments.
Human trials of HS-10535 are still pending. Merck hasn’t even identified the diseases that it will test on first.
Lilly’s Zepbound, on the other hand, has already been released.
Zepbound has contributed more than $1.2 Billion to the company’s revenue growth of 42 percent in the third quarter 2024.
Some experts expect Eli Lilly, the world’s largest healthcare company, to reach a $1 trillion valuation based on its weight-loss program.
What Merck shares will gain from the licensing agreement
Merck’s announcement on Hansoh Pharma, made on Wednesday, could be a long-term boon for the multinational, based in Rahway, NJ.
The new licensing agreement secured it exposure to an obesity drug market analysts predict will be worth more than $100 billion in this decade.
If Merck’s anti-obesity venture is successful, it could unlock a significant increase in its share price, just as weight-loss treatments have done for Eli Lilly or Novo Nordisk.
Merck is also focusing on an orally administered pill, which neither Lilly nor Novo has launched yet.
Orforglipron, a drug developed by the former, has shown promising results in late-stage clinical trials.
Lilly is, however, ahead of Merck when it comes to introducing an obesity drug orally.
Merck Stock: Should you buy it now?
Overall, today’s announcement has made Merck stock more attractive.
Analysts at Cantor-Fitzgerald saw a potential gain of more than 50% in the share price of the company, even without it.
MRK could be able to achieve this price in 2025 due to the optimism surrounding the company’s entry into the market for weight-loss drugs.
Merck shares also pay a healthy dividend of 3.24%, which makes them more attractive to own on the long-term.
This post Merck’s Weight-loss Pill Deal: What it Means for Eli Lilly could be modified as new developments unfold.
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