AstraZeneca pays hefty price for Chinese weight-loss drug

The drugs giant has licensed an experimental anti-obesity pill from China’s Eccogene as it tries to grab a chunk of the lucrative weight-loss market

Key Takeaways:

• Chinese biotech Eccogene says its small-molecule drug may prove easier to use than rival weight-control therapies
• Anti-obesity drugs are a potential gold mine for the pharma sector, even for latecomers to the market, but competition is fierce among developers of GLP-1 weight-loss drugs

By Molly Wen

The battle is on to develop innovative drugs to tackle a global obesity crisis, including pills to control blood sugar levels and curb hunger pangs.

Drugs giant AstraZeneca (AZN.L) is investing heavily in becoming a major player in the weight-loss market after sealing a deal worth up to $2 billion for rights to an oral obesity drug being developed by China’s Eccogene Inc.

The drug is designed to mimic a hormone called glucagon-like peptide-1 (GLP-1) that affects the release of insulin and has been linked to weight loss. The new class of GPL-1 drugs has been one of the hottest pharmaceutical trends this year, after a first wave of anti-obesity injections burst onto the global market.

The deal with AstraZeneca announced last Thursday covers licensing rights for Eccogene’s ECC5004 GLP-1 drug, which would be administered as a daily pill to treat obesity, type 2 diabetes and other cardiovascular or metabolic conditions.

Under the terms of the deal, Eccogene gets $185 million upfront and will be entitled to milestone payments of up to $1.83 billion as the drug moves through clinical trials to the market, plus royalties on eventual sales. In return, AstraZeneca obtains an exclusive license to develop and commercialize the drug outside of China, while the two companies will partner to launch the product in the Chinese market.

Eccogene’s internal drug discovery platform came up with ECC5004, which was cleared by U.S. regulators for Phase 1 clinical trials a year ago. Before that, preclinical studies had shown promising results for effectiveness and safety. Eccogene CEO Dr. Jingye Zhou said the company’s product, as a small-molecule drug, could be more convenient and easier to use than therapies currently on the market. Many small-molecule drugs can be taken orally and are readily absorbed by the body, which can enhance their impact.

AstraZeneca cited an urgent need for innovative treatments as the expanding obesity crisis affects more than one billion people worldwide. The Anglo-Swedish drugs conglomerate described the initial clinical results for ECC5004 as very promising, saying the drug could provide an alternative to existing injectable therapies, whether used on its own against obesity and type 2 diabetes or combined with other treatments for cardiovascular-metabolic diseases. The company said the licensed drug would strengthen and supplement its in-house R&D pipeline.

Founded in 2018, Eccogene aims to develop novel drugs to combat metabolic and immune disorders. It completed its Series A financing in 2018 and raised 180 million yuan of Series B financing in June this year. The company has two other projects in the preclinical research stage in addition to ECC5004.

Zhou, Eccogene’s co-founder, headed the chemistry department at the R&D center in China for drugs multinational Eli Lilly (LLY.US). The Chinese company’s other founder, Dr. Jianfeng Xu, served as chief scientist at the Eli Lilly R&D center. Both founders have deep experience in small-molecule drugs and in GLP-1 research, for which Eli Lilly has been a trailblazer.

Boom in quick-fix weight loss

AstraZeneca’s $185 million upfront payment for the tie-up is unusually generous by sector standards, as illustrated by a deal in the field of antibody-drug conjugates, or ADCs, used in targeted cancer therapy. Innovative drug company Sichuan Kelun-Biotech Biopharmaceutical (6990.HK) licensed seven of its preclinical ADC candidates to multinational drug company Merck (MRK.US) in December last year for an initial upfront payment of just $175 million.

Why would AstraZeneca fork out a bigger sum for a single experimental drug that only recently entered Phase 1 trials? The pharmaceutical powerhouse clearly believes in a potentially gigantic market for weight-loss drugs. GLP-1 is a small-molecule peptide, originally envisaged as a diabetes treatment, that stimulates insulin release and suppresses the appetite. Semaglutide, a GLP-1 injection developed by Novo Nordisk (NVO.US), was approved by U.S. regulators in 2021 for weight management under the brand name Wegovy, heralding a boom in quick-fix obesity therapies.

Boosted by demand for its obesity drugs, Novo Nordisk’s operating profit rose 31% in the third quarter to the end of September from the same period a year earlier. GLP-1 drug sales for diabetes rose 45%, while sales for the treatment of obesity soared 167%.

The potential for GLP-1 drugs extends far beyond that. Tirzepatide, an injectable drug produced by Eli Lilly, outperformed Novo Nordisk’s product for weight loss in clinical trials and was approved by U.S. regulators as an obesity treatment earlier this month. 

The news galvanized investors, sending Eli Lilly’s market capitalization to $587.7 billion on the day of the approval, making it the world’s most valuable drug company.

Research institute Frost & Sullivan estimates the number of obese people in the world will rise to 1.55 billion by 2025, representing a compound annual growth rate of 5.1% in the five years from 2020. The global market for GLP-1 drugs for diabetes and obesity should reach $90 billion in 2030, according to Topsperity Securities. The vast market potential has lured many companies into the race to develop drug candidates for weight loss. 

As of August this year, 106 clinical trials for GLP-1 weight-loss drugs were underway around the world. China’s Innovent Biologics (1801.HK) and Salubris Pharmaceuticals (002294.SZ), among others, have projects at the Phase III stage. AstraZeneca also had two potential GLP-1 drugs in its pipeline but halted research in the first half of the year as the results did not exceed those of other products on the market or in development.

The AstraZeneca cash will help Eccogene fund the high costs of research and clinical trials for its ECC5004 drug. But the new partnership could be in a race against time.  As yet, no GLP-1 pill has gained market approval, but anti-obesity pioneers Eli Lilly and Novo Nordisk are already locked in battle on this front, with their oral drugs already in Phase II or Phase III trials. Eccogene will be under pressure to catch up in the development stakes, or risk missing out on the market opportunity.

Have a great investment idea but don’t know how to spread the word? We can help! Contact us for more details.

The Bamboo Works offers a wide-ranging mix of coverage on U.S.- and Hong Kong-listed Chinese companies, including some sponsored content. For additional queries, including questions on individual articles, please contact us by clicking here.

To subscribe to Bamboo Works free weekly newsletter, click here