Novo Nordisk bids $650 million to top Pfizer deal with obesity biotech Metsera
In September, two pharmaceutical giants bid for metabolic drug biotech Metsera, with Novo Nordisk losing out to a higher offer of $4.9 billion from Pfizer, in part because of the regulatory and financial risks associated with a potential deal for the Danish company. Those risks remain, but Novo is back with a new unsolicited bid. The transaction is similar to the previous one, but Metsera shareholders will receive more guaranteed funding up front.
Metsera is now preparing to pull out of Pfizer, saying on Thursday it had concluded Novo's new offer was superior. Novo proposed buying each Metsera share for $56.50 in cash, or about $6.5 billion. The price represents a premium of more than 69% to Metsera's closing price on September 19, the last trading day before the acquisition of Pfizer was announced. Additional payouts are subject to achieving milestones.
Pfizer is challenging Novo's offer but will not provide more funding. The New York-based pharmaceutical giant said Novo's offer did not qualify as a superior offer under the terms of its acquisition agreement with Metsera. Pfizer said it will exercise its legal rights under the agreement.
Metsera is developing a weight-loss drug in the same class of drugs as Novo Nordisk's Wegovy, a peptide drug that mimics intestinal hormones and triggers metabolic effects to achieve weight loss. But Metsera's GLP-1 drug has advantages in dosage and manufacturing compared to current market leaders Wegovy and Eli Lilly and Company's Zepbound. The biotech company is also developing pill formulations and pursuing additional obesity targets. In the increasingly competitive obesity market, Metsera's program could differentiate itself in the field, making it attractive to any company looking to succeed in the metabolic drug space.
Novo was one of eight companies in talks with Metsera over a potential deal last year, according to regulatory filings related to the Pfizer deal. The “first party”, now known as Novo, expressed continued interest early on. But one of Metsera's concerns about the Novo deal is the regulatory risk that the proposed collaboration would not pass muster with antitrust regulators. For this risk, the company said in the filing, “Metsera would be required to receive substantial compensation if it could agree to a transaction that assumed such risk.”
Novo’s new offer works in two steps. Metsera stock will be paid in cash at $56.50 per share immediately after the final agreement is signed and before regulators even sign off on the deal. In exchange, Metsera will issue Novo non-voting preferred shares representing 50% of its capital stock. Metsera will then declare a cash dividend of $56.50 per share, which will be paid to shareholders 10 days later.
The acquisition will enter the second step after receiving shareholder and regulatory approvals. Metsera shareholders will receive contingent value rights (CVR) to pay up to $21.25 per share in cash, subject to development and regulatory approval milestones, and Novo will acquire Metsera's remaining outstanding shares. CVR milestones are similar to those in the Pfizer agreement and, if all are achieved, would add approximately $2.5 billion to the deal. The price Novo is now proposing to pay of up to $21.25 per share is significantly lower than the CVR payment of up to $37 proposed in September, but in line with Pfizer's CVR.
Apart from the amount, Novo's new proposal is essentially the same deal that Metsera's board rejected in September. According to the filing, Metsera's board acknowledged that this deal structure provides greater value to the company's shareholders than a traditional break fee if the deal does not close due to regulatory issues. But Metsera's board decided against Novo's bid in September, noting that regulatory risks could delay completion of the deal by up to two years and that the CVR would only be paid much later, if at all.
The board's reasons for selecting Pfizer's offer included certainty about the company's financial terms and faster closing of the deal. Pfizer expects to close the deal in the fourth quarter of this year. Metsera's board of directors voted to accept Pfizer's offer of $47.50 per share, or about $4.9 billion.
Leerink Partners analyst David Risinger said in a research note on Thursday that it is unclear why Novo is confident that antitrust regulators will support its acquisition of Metsera, given that Novo and Eli Lilly and Company dominate the market for metabolic drugs that mimic intestinal hormones. Additionally, the Trump administration's “America First” policy may play a role in regulatory oversight of Metsera's Novo deal.
Pfizer's statement on Novo's new Metsera takeover bid described the deal as an attempt by a dominant company to stifle competition by acquiring a U.S. challenger. Pfizer believes the deal's structure circumvents antitrust laws and creates regulatory and enforcement risks.
The pharmaceutical giant said: “Based on Pfizer's agreement with Metsera, the proposal is illusory and cannot be counted as a better proposal. Pfizer is prepared to take all legal avenues to exercise its rights under the agreement.”
Like many M&A deals, Pfizer's agreement with Metsera includes a clause that prohibits the biotech from pursuing other offers. But the agreement allows Metsera to respond to unsolicited higher offers. In addition to delivering more value to shareholders, the agreement defines a superior corporate proposal as one that takes into account all terms and conditions, “including all financial, regulatory, financing, conditional, legal and other terms and conditions.”
Pfizer's agreement with Metsera remains in effect. But the biotech notified it planned to reach a final agreement with a higher offer, giving Pfizer four business days to revise the terms of its deal. If Metsera terminates the Pfizer agreement to accept Novo's offer, the biotech company will pay the pharmaceutical giant a $190 million termination fee.
Photo: Liselotte Sabroe/Scanpix Denmark/AFP via Getty Images
