By Sriparna Roy
(Reuters) -Eli Lilly and Co said on Friday it will buy privately held Versanis for potentially up to $1.93 billion to strengthen its position in the fast-growing market for weight-loss treatments.
Shares of Eli Lilly (NYSE:LLY) rose 3% after the deal that gives it access to an experimental obesity drug being tested along with rival Novo Nordisk (NYSE:NVO)'s weight-loss treatment in a mid-stage study.
Analysts expect the market for weight-loss drugs to reach up to $100 billion within a decade, with early movers such as Eli Lilly and Novo Nordisk grabbing a large chunk of the market.
Their drugs belong to a class of treatments known as incretins that are designed to mimic the action of the GLP-1 hormone, which helps regulate blood sugar, slow stomach emptying and decrease appetite.
Versanis's lead drug, bimagrumab, acts directly on fat cells without reducing appetite and without prompting lean mass loss.
"One of the key concerns with weight loss medications is the loss of lean mass. The goal is to lose more fat vs. muscle, but with any weight loss program calorie restriction could impact both," said BMO Capital Markets analyst Evan Seigerman.
"Lilly may be able to tip the scales in favor of more fat loss" by combining an incretin with a drug to encourage muscle retention or gain, he said.
Bimagrumab, which Versanis licensed from Swiss drugmaker Novartis, is also in the early stage trials for potential treatment of heart failure in obesity.
Under the terms of the agreement, Versanis shareholders could receive $1.93 billion, which includes an undisclosed upfront payment and additional payments upon achievement of certain development and sales milestones.